Mumbai, India – Despite the prevailing strength in the US Dollar (USD) and elevated US yields, the Indian Rupee (INR) held its ground on Wednesday, maintaining a flat trend. Robust economic data from the United States has tempered expectations of aggressive rate cuts by the Federal Reserve (Fed), with investors revising down the probability of a March rate cut from 80% to 49%, as per the CME FedWatch Tool.
The positive economic outlook in India provided a cushion for the INR, as Union Petroleum Minister Hardeep Puri expressed confidence in the country’s economy. Puri stated that India is on track to touch a $5 trillion economy in the next financial year, with ambitions to double to $10 trillion by the end of the decade. The Minister emphasized India’s robust growth, projecting it to be the fastest-growing major economy and reaching the $5 trillion mark by 2024–25.
Market participants are eagerly awaiting the US S&P Global Purchasing Managers’ Index (PMI) report for potential market direction. Later in the week, attention will shift to the US Q4 Gross Domestic Product Annualized and the December Core Personal Consumption Expenditures Price Index (Core PCE), which may provide insights into the US interest rate outlook. Notably, Indian markets will observe a closure on Friday for Republic Day.
Indian Economic Strength: India surpasses Hong Kong as the fourth-largest stock market globally, boasting a market capitalization of $4.3 trillion. The National Statistics Office anticipates the Indian GDP to grow by 7.3% in the current fiscal year 2023–24, maintaining its position as the fastest-growing major economy.
Federal Reserve’s Rate Cut Expectations: The market now anticipates a 125 basis points reduction in rates from the Federal Reserve in 2024, down from around 175 bps earlier this month. Fed officials, including Christopher Waller, emphasize a methodical and cautious approach to rate cuts, diverging opinions on the timing.
US Economic Indicators: The US Richmond Fed Manufacturing Index registers at -15 in January, below market expectations. Preliminary forecasts for the US S&P Global Services PMI and Manufacturing PMI indicate potential shifts in economic activity.
Technical Analysis – USD/INR Pair: The USD/INR pair remains within a well-defined range of 82.80–83.40 since September 2023. Technical indicators, such as the 100-period Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI), suggest a relatively stable market. Resistance levels at 83.40, 83.47, and 84.00, with support at 83.00, 82.80, and 82.60.
As global economic uncertainties persist, the Indian Rupee maintains resilience, navigating through a range-bound trajectory amidst conflicting signals from the US and domestic economic optimism.