The Indian Rupee: A Closer Look at Recent Developments
- The Indian Rupee remains subdued due to risk aversion amid Trump’s tariff threats.
- Asian currencies struggle as offshore Chinese Yuan falls following remarks from a senior trade adviser to US President-elect Trump.
- Indian benchmark indices opened lower on Friday, mirroring Wall Street’s overnight decline.
As the Indian Rupee (INR) continues to face challenges, it is essential to understand the factors contributing to its current situation:
Factors Impacting the Indian Rupee
1. Stronger US Dollar
The USD/INR pair is experiencing upside momentum, largely influenced by the strength of the US Dollar amidst Trump’s tariff threats.
2. Offshore Chinese Yuan Weakness
Asian currencies, including the INR, are under pressure due to the weaker offshore Chinese Yuan, triggered by remarks from a senior trade adviser to US President-elect Donald Trump.
3. Domestic Factors
Domestically, the appointment of bureaucrat Sanjay Malhotra as the next RBI Governor and expectations of interest rate cuts are impacting the INR. Additionally, India’s retail inflation moderation in November and the RBI’s foreign exchange interventions also play a role in shaping the currency’s performance.
Market Insights and Outlook
- Investors in India are cautious ahead of the upcoming Federal Reserve’s (Fed) Federal Open Market Committee (FOMC) meeting next week.
- Foreign Institutional Investors (FIIs) recorded net sales of Indian equities, while Domestic Institutional Investors (DIIs) made net purchases.
- Financial markets are anticipating a 25 basis point rate cut by the Federal Reserve, according to the CME FedWatch Tool.
- US economic indicators, such as the Producer Price Index (PPI) and Consumer Price Index (CPI), are showing positive trends.
- S&P Global Ratings projects growth for the Indian economy in the coming years, driven by various factors.
Technical Analysis: USD/INR Performance
The USD/INR pair is near its all-time highs, with a bullish bias indicated by the daily chart analysis. Key levels to watch include:
Technical Levels:
- All-time high: 84.88
- Support: 84.73 (nine-day Exponential Moving Average)
- Resistance: 85.10 (upper boundary of ascending channel)
Current Situation:
The pair is trading around 84.80, with potential for further upside towards the upper boundary of the ascending channel.
Chart Analysis:
