On Friday, the Indian Rupee (INR) displayed resilience against the US Dollar (USD), marking a modest uptick as the USD experienced a slight decline. The boost in the Indian currency comes just days before Union Finance Minister Nirmala Sitharaman is set to unveil India’s interim budget for the fiscal year 2024-25 (FY25) on February 1.
The upcoming Fiscal Budget 2024-25 is anticipated to concentrate on government spending, with no significant alterations expected until a new government takes charge post the general elections. Analysts project a concerted effort to narrow the fiscal deficit as a percentage of GDP to 5.30% in 2024-25. Furthermore, there is speculation that the Indian government may augment welfare expenditure, potentially reducing the budget deficit to 4.5% of GDP by the fiscal year 2025-26.
In terms of economic indicators, the highlight on Friday will be the release of the US Core Personal Consumption Expenditures Price Index (Core PCE) for December, considered the Federal Reserve’s preferred inflation measure. The forecast predicts a 0.2% month-on-month increase and a 3.0% year-on-year growth in the Core PCE. Notably, Indian markets will remain closed on Friday in observance of Republic Day.
In recent market developments, foreign investors have divested nearly $2 billion in Indian equities in January, reversing a net purchase of $7.9 billion in the preceding month. Despite this, India is projected to maintain its status as the fastest-growing major economy in the coming year, propelled by robust government spending, according to a Reuters poll of economists.
On the global front, the US Gross Domestic Product (GDP) displayed growth at a 3.3% annualized rate in the fourth quarter of 2023, surpassing the previous reading of 4.9%. However, concerns linger as US Initial Jobless Claims for the week ending January 20 rose to 214,000, worse than the market expectation of 200,000, with Continuing Claims increasing to 1.833 million from the previous reading of 1.806 million. Additionally, Durable Goods Orders remained stagnant in December, falling short of the expected 1.1% increase.
Turning to technical analysis, the Indian Rupee maintains its position within the multi-month trading range of 82.80–83.40 against the USD since September 2023. The USD/INR pair is currently above the key 100-period Exponential Moving Average (EMA), yet caution is advised as the 14-day Relative Strength Index (RSI) is below the 50.0 midline, suggesting vulnerability in the upward momentum.
For USD/INR, the 83.00 psychological mark serves as the initial support level, followed by the trading range’s lower limit at 82.80 and a January 15 low. Conversely, the upper boundary of the trading range at 83.40 acts as immediate resistance, with further upside targets at a 2023 high of 83.47 and the psychological milestone of 84.00. The intricacies of the fiscal budget announcement and global economic indicators will likely steer the trajectory of the Indian Rupee in the days to come.