The Indian Rupee (INR) is facing downward pressure in early Monday trading, weighed down by a combination of factors including a stronger US Dollar (USD), weak Chinese Yuan, and concerns over India’s slowing economic growth. Additionally, robust demand from importers and oil companies has further supported USD gains against the INR. However, market participants believe that the Reserve Bank of India’s (RBI) intervention and increased government spending could help limit the rupee’s losses.
Market focus this week is on the US November Consumer Price Index (CPI), which is expected to rise to 2.7% YoY, up from 2.6% in October. The CPI release could influence the Federal Reserve’s decision on its anticipated 25-basis point rate cut during its December policy meeting. Meanwhile, India’s own CPI inflation data is due on Thursday, which will offer insights into domestic inflation trends and their impact on monetary policy.
The RBI’s monetary policy committee (MPC) kept its benchmark repo rate unchanged at 6.50% in October. Governor Shaktikanta Das emphasized the importance of maintaining price stability to secure strong foundations for economic growth. India’s forex reserves saw a modest increase of $1.51 billion, reaching $658.091 billion for the week ending November 29, signaling a buffer for potential market volatility. Despite these measures, analysts from MUFG Bank expressed skepticism over the strength of Asian currencies, citing potential headwinds from geopolitical risks and US tariff policies under the Trump administration. This macro backdrop makes hedging against Asian FX weakness an attractive strategy.
The USD/INR pair is trading well above its 100-day Exponential Moving Average (EMA), maintaining a bullish outlook. The 14-day Relative Strength Index (RSI) remains strong at 65.90, suggesting further upside potential. Key resistance levels include the all-time high of 84.77 and the psychological level of 85.00, with the next target at 85.50. On the downside, support is observed at 84.60, with additional levels at 84.22 and 84.05-84.00.
