The Indian Rupee (INR) traded flat on Friday, stabilizing after hitting a record low of 84.50 against the US Dollar (USD) in the previous session. This followed the release of mixed economic data. The HSBC India Manufacturing Purchasing Managers Index (PMI) for November eased slightly to 57.3, down from 57.5 in October, while the Services PMI rose to 59.2 from 58.5.
The INR remained steady in response to these figures, reflecting balanced market sentiment.
Pressures Mount from Equity Sell-Off and Oil Prices
The domestic currency faced headwinds from a significant sell-off in Indian equity markets and rising crude oil prices, exacerbated by escalating geopolitical tensions between Russia and Ukraine. Despite these pressures, intervention by the Reserve Bank of India (RBI), including dollar sales by state-run banks, has provided a buffer to the Rupee.
RBI Policy Outlook and External Concerns
RBI Governor Shaktikanta Das emphasized the strength of the Indian economy, which has allowed the central bank to focus on reducing inflation sustainably toward its 4% target. However, concerns persist regarding portfolio outflows, steady USD demand, and potential economic slowdown risks, keeping the INR vulnerable to gradual depreciation.
Dilip Parmar, a foreign exchange analyst at HDFC Securities, noted that these factors might continue to weigh on the Rupee, particularly as global demand for the Dollar remains strong.
Global Factors Support USD Strength
The Dollar’s strength is underpinned by robust US economic data. Weekly Initial Jobless Claims fell to 213,000, below expectations of 220,000, while October Existing Home Sales rose by 3.4%. Chicago Fed President Austan Goolsbee suggested that the Federal Reserve may slow the pace of rate cuts as inflation trends toward the 2% target.
Technical Outlook: USD/INR Faces Resistance but Remains Bullish
The USD/INR pair holds above the 100-day Exponential Moving Average (EMA) on the daily chart, maintaining its bullish outlook despite signs of a potential correction. A bearish divergence in the 14-day Relative Strength Index (RSI), where the indicator failed to match the pair’s recent high, suggests consolidation or a pullback may be on the horizon.
Key levels to watch include:
Upside: The all-time high of 84.50 and the psychological barrier at 85.00.
Downside: The lower trend channel limit near 84.36, with extended losses potentially testing the 84.00-83.90 zone, aligned with the 100-day EMA.
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