USD/INR Rises Amid Foreign Investment Outflows.

USD/INR Rises Amid Foreign Outflows: Will RBI Intervention and Weak USD Support INR?

The Indian Rupee (INR) weakened on Monday as concerns over Foreign Portfolio Investment (FPI) outflows continued to pressure the currency. So far in 2024, foreign investors have pulled over $11 billion from Indian equities, dampening INR sentiment.

However, the softening US Dollar (USD) could help counteract some of these outflows, offering support to the Rupee. Additionally, the Reserve Bank of India (RBI) is likely to intervene to prevent excessive depreciation. Lower crude oil prices may also provide relief, as India—one of the world’s largest oil importers—benefits from cheaper energy costs.

Key Economic Events to Watch

• Later today, the Chicago Fed National Activity Index for January will be released.
• On Thursday, February 29, markets will closely watch the US Q4 GDP preliminary reading, which could impact USD/INR trends.

Indian Economy Outlook & PMI Data

Despite the INR’s weakness, India’s economy is projected to recover in Q3 FY25, with GDP growth estimated at 6.2%, up from 5.4% in Q2, according to Union Bank of India.

Latest PMI (Purchasing Managers’ Index) data also highlights strong economic activity:

• HSBC India Manufacturing PMI eased slightly to 57.1 in February from 57.5 in January.
• Indian Services PMI surged to 61.1 from 56.5, signaling strong service sector growth.
• Composite PMI rose to 60.6 in February from 57.7 in January.

According to HSBC’s Chief India Economist Pranjul Bhandari, global restocking is boosting new export orders, while easing input prices and rising output prices are improving margins for Indian producers.

US Economic Data & Impact on USD/INR

• US S&P Global Composite PMI dropped to 50.4 in February (from 52.7).
• US Manufacturing PMI slightly improved to 51.6, beating forecasts.
• US Services PMI fell sharply to 49.7, missing expectations of 53.0.
• University of Michigan Consumer Sentiment Index fell to 64.7, below the expected 67.8.

Weak US economic indicators could pressure the USD, potentially limiting further INR depreciation.

USD/INR Technical Outlook: Key Levels to Watch

The USD/INR pair maintains a bullish bias, holding above the 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains near 50.0, indicating potential short-term consolidation.

Resistance Levels:

• 87.00 – Psychological resistance
• 88.00 – All-time high
• 88.50 – Further upside target

Support Levels:

• 86.35 – February 12 low
• 86.14 – January 27 low
• 85.65 – January 7 low

Final Thoughts

The USD/INR pair remains in focus as foreign outflows weigh on the Rupee. However, potential RBI intervention, lower oil prices, and a weaker USD could provide some relief. Traders should closely monitor US GDP data and RBI actions for further direction.

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