The Indian Rupee (INR) traded on a weaker note on Wednesday, with traders on alert for potential interventions from the Reserve Bank of India (RBI) to prevent the currency from falling below the 84 mark, though such actions have not been officially confirmed. Meanwhile, a decline in crude oil prices to their lowest levels since January may offer some support to the INR, given India’s status as the world’s third-largest oil consumer and importer.
New data released today revealed that the HSBC India Services Purchasing Managers Index (PMI) rose to 60.9 in August, up from 60.3 in July and surpassing the market consensus of 60.4. This is the highest PMI reading since March. Despite the positive news, the INR did not see significant gains against the USD, as renewed demand for the US Dollar and risk aversion among investors continued to exert pressure on the local currency.
Looking ahead, attention will turn to the upcoming US JOLTS Job Openings and Fed Beige Book reports, with the US Nonfarm Payrolls (NFP) for August set to be released on Friday. These reports may provide insights into the Federal Reserve’s potential rate cut decisions for the year. The INR remained largely unchanged during Wednesday’s early European session.
Market Update:
PMI Data: The HSBC India Services PMI indicates robust growth driven by increased domestic orders, according to Pranjul Bhandari, Chief India Economist at HSBC. Despite the strong services sector performance, the INR has struggled against the USD.
Growth Forecasts: The World Bank has upgraded India’s growth forecast to 7% for the current financial year (FY25) from a previous estimate of 6.6%.
Economic Goals: RBI Deputy Governor Michael Patra emphasized the need for rapid economic growth over the next decade to meet Prime Minister Narendra Modi’s 2047 development target.
US Economic Indicators: The US ISM Manufacturing PMI showed continued contraction in August, rising to 47.2 from 46.8, but falling short of expectations. Markets anticipate a 61% chance of a 25 basis points Fed rate cut in September and a 39% chance of a 50 basis points reduction.
Technical Analysis: The USD/INR pair is currently in a consolidative phase. Despite this, the longer-term outlook remains bullish with the price supported above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is in bullish territory at 58.0. A decisive break above the 84.00 level could lead to a rise towards 84.50. Conversely, a breach below 83.84, the August 30 low, might result in further declines, potentially testing the 100-day EMA at 83.62.
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