The Indian Rupee (INR) continued its decline on Tuesday, approaching a fresh record low, driven by robust demand for the US Dollar (USD) from corporates, likely linked to month-end payments. The weakness of the Chinese Yuan also contributed to the INR’s downward movement. Additionally, a slight uptick in crude oil prices, which impacts India as the world’s third-largest oil consumer, added to the downward pressure on the currency.
Despite these challenges, the Reserve Bank of India (RBI) has been actively intervening in the currency market to limit the INR’s losses. The central bank has ramped up its forward USD sales to mitigate the impact of spot market interventions on the banking system and foreign exchange reserves. With the holiday trading week approaching, market activity is expected to remain quiet.
INR Weakens Amid Mixed Global Economic Data
On Monday, India’s benchmark indexes closed higher, with the Nifty 50 rising 0.7% to 23,753.45 points and the BSE Sensex climbing 0.64% to 78,540.17 points, ending a five-session losing streak.
According to currency traders, the RBI likely intervened to prevent further depreciation of the INR, particularly after it fell to 85.12 against the USD. Public sector banks reportedly conducted dollar sales on behalf of the RBI to stabilize the currency.
In the US, New Home Sales increased by 5.9% to an annualized rate of 664,000 units in November, exceeding expectations. However, Durable Goods Orders for November fell by 1.1%, missing the estimated 0.4% decline, which added a layer of uncertainty to the global outlook.
Technical Outlook: USD/INR Holding Key Levels
The Indian Rupee continued its slide, but the overall outlook for the USD/INR pair remains positive, with the exchange rate holding above the key 100-day Exponential Moving Average (EMA) on the daily chart.
The immediate resistance level for USD/INR is at 85.25, the upper boundary of the ascending channel. A breakout above this level could trigger further gains, potentially reaching 85.50 and the psychological 86.00 level.
On the downside, the 85.00-84.95 zone serves as an important support area. The 14-day Relative Strength Index (RSI) remains above the midline at 68.95, indicating that the support level is likely to hold. A break below this support could expose the 100-day EMA at 84.21.
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