The Indian Rupee (INR) slipped lower on Monday, pressured by persistent outflows from Indian equities, which hit a record monthly high. Foreign portfolio investors have sold a net $8.4 billion in Indian equities so far in October, surpassing the previous record outflow of $8.35 billion in March 2020.
Despite this, a decline in crude oil prices and potential interventions by the Reserve Bank of India (RBI) through U.S. dollar sales could help limit the rupee’s losses in the short term. Investors are also eyeing speeches from Federal Reserve officials Neel Kashkari and Jeffrey Schmid for further guidance.
Market Movers: Rupee Struggles Amid Equity Outflows
The outflow of funds from Indian equities has been a major factor driving the rupee’s weakness. However, broader market dynamics are also in play. On Friday, Atlanta Federal Reserve President Raphael Bostic indicated he is not rushing to cut interest rates but sees a potential reduction to a range between 3% and 3.5% by the end of next year.
Additionally, market expectations for a U.S. rate cut in November have grown, with the CME FedWatch tool showing a 92.6% chance of a 25 basis point cut. U.S. economic data also continues to influence global markets. Building permits in the U.S. fell by 2.9% in September, while housing starts declined by 0.5%, both missing expectations.
Technical Outlook: USD/INR Maintains Bullish Trend
The USD/INR pair continues to trade in positive territory, maintaining a bullish outlook on the daily chart. The pair remains above the ascending trendline and the key 100-day Exponential Moving Average (EMA), while the 14-day Relative Strength Index (RSI) holds near 60, indicating the potential for further upside.
A sustained move above the all-time high of 84.15 could push USD/INR towards 84.50 and potentially the 85.00 psychological level. On the downside, a break below the 84.00 trendline could test support at 83.71, with the next key level at 83.00, the low from May 24.
Investors will continue to monitor global economic trends and central bank policies, which remain key drivers of the rupee’s trajectory in the coming days.
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