The Indian Rupee (INR) maintained its stability against the US Dollar (USD) on Tuesday, with market participants speculating that the Reserve Bank of India (RBI) may have intervened in the foreign exchange market to support the domestic currency and prevent it from falling below the 84.00 level.
In the near term, the USD/INR pair might see some appreciation due to a broader decline in Asian equities and currencies, driven by growing concerns over a potential slowdown in the US economy. However, lower oil prices could mitigate downward pressure on the INR, as India, the world’s third-largest oil consumer and importer, stands to benefit from reduced import costs.
The US Dollar has strengthened amid reduced expectations for a substantial interest rate cut by the Federal Reserve (Fed) at its September meeting. According to the CME FedWatch Tool, the probability of a 50 basis point (bps) rate cut has decreased slightly to 29.0%, down from 30.0% the previous week.
Market Insights: Chicago Fed President Austan Goolsbee commented on Friday that Fed officials are aligning with the broader market sentiment that a policy rate adjustment is forthcoming. According to FXStreet’s FedTracker, Goolsbee’s remarks were rated dovish with a score of 3.2 on a scale from 0 to 10.
India’s foreign exchange reserves reached a record high of $683.99 billion as of August 30, up from $681.69 billion previously. This increase is attributed to a significant influx of foreign exchange, fueled by strong economic growth and the inclusion of Indian assets in JPMorgan’s major emerging market debt index, which has attracted more foreign investment.
Additionally, the ADP Employment Change report showed a private-sector employment increase of 99,000 in August, lower than July’s 111,000 and the estimated 145,000. Meanwhile, weekly US Initial Jobless Claims rose to 227,000 for the week ending August 30, compared to 232,000 previously and below the consensus estimate of 230,000.
In India, the Composite PMI for August continued to demonstrate robust growth, driven by accelerated business activity in the service sector, which saw its fastest expansion since March. This growth was primarily supported by an increase in new domestic orders, according to Pranjul Bhandari, Chief India Economist at HSBC. The World Bank has revised India’s growth forecast for the current financial year (FY25) to 7%, up from the previous projection of 6.6%.
Technical Analysis: The USD/INR pair is currently trading around 84.00. The daily chart indicates that the pair is consolidating within a symmetrical triangle pattern, suggesting reduced volatility and a period of consolidation. The 14-day Relative Strength Index (RSI) remains above 50, signaling that the bullish trend is still intact.
On the downside, the nine-day Exponential Moving Average (EMA) at 83.91 provides immediate support, aligning with the lower boundary of the symmetrical triangle near 83.90. A break below this support level could trigger a bearish shift, potentially driving the USD/INR pair toward its six-week low around 83.72.
Conversely, the USD/INR pair is testing the upper boundary of the symmetrical triangle near the 84.00 level. A breakout above this resistance could propel the pair towards its all-time high of 84.14, recorded on August 5.
Related Topics:
