Indian Rupee Weakens Amid Foreign Outflows and Rising US Bond Yields
The Indian Rupee (INR) softened on Tuesday due to sustained foreign outflows from domestic stocks and rising US bond yields, largely influenced by increasing odds of Donald Trump winning the US presidential election. However, a decline in crude oil prices could offer some relief to the local currency. The Reserve Bank of India (RBI) is expected to intervene by selling US dollars via public sector banks, aiming to limit the depreciation of the INR.
Foreign Outflows Weigh on INR
Foreign investors have withdrawn $10 billion from India’s equity and debt markets in October, marking the largest outflows this year. This outflow is a significant factor pressuring the INR. At the same time, Nomura has warned that India is entering a phase of cyclical growth slowdown, challenging the RBI’s forecast of 7.2% GDP growth for FY25. Nomura believes this estimate is overly optimistic.
The Department of Economic Affairs projects India’s economy to grow between 6.5% and 7.0% for the current financial year.
Key US Economic Data to Watch
Traders are closely monitoring the release of major US economic data this week, including:
- US Gross Domestic Product (GDP) Annualized for Q3,
- The Personal Consumption Expenditures (PCE) Price Index for September,
- The US Nonfarm Payrolls (NFP) report.
These figures will likely impact global markets, including the USD/INR exchange rate.
USD/INR Technical Analysis
The USD/INR pair remains bullish, trading above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) is currently above the midline, near 60.15, indicating continued support for the pair.
A break above 84.50 could push the USD/INR toward the 85.00 psychological level. On the downside, if the pair consistently trades below 84.05, it could drop to 83.76, the 100-day EMA level.
Conclusion: INR Faces Pressure, but Support Remains
The Indian Rupee faces multiple headwinds, including foreign outflows and rising US bond yields. However, falling crude oil prices and RBI intervention could help stabilize the currency. Keep an eye on upcoming US economic data, as it may influence the INR’s movement in the coming weeks.
