“Indian Rupee Nears Record Low Amid Key Challenges and USD/INR Trends

Indian Rupee Weakens Near Record Low Amid Global and Domestic Challenges

The Indian Rupee (INR) is trading near a fresh record low as multiple headwinds weigh on the currency. A stronger US dollar (USD), outflows of foreign funds, and declining performance among Asian currencies are putting sustained pressure on the INR. While the Reserve Bank of India (RBI) is intervening in the forex market to stabilize the rupee, further depreciation remains a concern.

Key Drivers Behind the INR Weakness

1. US Dollar Strength
   The USD continues to gain momentum, driven by importer demand and activities of foreign banks.

2. Foreign Outflows
   Outflows of foreign capital are exacerbating the downward pressure on the INR.

3. Asian Market Trends
   The performance of Asian peers is setting the tone for regional currencies, with the INR remaining particularly vulnerable.

Reserve Bank of India Steps In

The RBI’s recent foreign exchange intervention and measures to boost foreign inflows aim to stabilize the INR. These actions, combined with a controlled current account deficit (CAD), may provide medium-term support.

India’s forex reserves rose by $1.51 billion to $658.09 billion for the week ending November 29, showcasing the RBI’s readiness to maintain market stability.

Economic Outlook and Inflation Data in Focus

The RBI has revised India’s GDP growth forecast for the current fiscal year, lowering it from 7.2% to 6.6%, reflecting a more cautious economic outlook. Meanwhile, the upcoming CPI data on Thursday is expected to offer further insights into domestic inflation trends.

Globally, the US Consumer Price Index (CPI) report on Wednesday could influence the Federal Reserve’s (Fed) next monetary policy decision, with markets anticipating an 85.8% probability of a 25-basis-point rate cut during the December 17-18 meeting, according to the CME FedWatch tool.

USD/INR: A Constructive Long-Term Outlook

The USD/INR pair remains bullish, holding above the critical 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) near 71.60 indicates overbought conditions, suggesting potential consolidation in the near term.

Key Levels to Watch

• Resistance Levels: The all-time high of 84.86 is a crucial resistance level. A sustained breakout above this level could push the pair toward 85.00 and 85.50.
• Support Levels: On the downside, 84.61 serves as immediate support, followed by 84.22 and the 100-day EMA at 84.06.

Conclusion

The Indian rupee faces continued challenges due to global and domestic factors, with the USD/INR pair showing bullish momentum. While the RBI’s interventions and rising forex reserves provide some reassurance, market participants remain focused on upcoming inflation data and global monetary policy decisions.

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