- The Indian Rupee weakens during Thursday's early European session, weighed down by a sell-off in Indian equities.
- The RBI's intervention and lower crude oil prices could limit the INR's decline.
- Investors are awaiting the US ISM Services PMI report, scheduled for later on Thursday.
The Indian Rupee (INR) continues to decline on Thursday, even as the US Dollar (USD) weakens. A sell-off in domestic equities, influenced by global trends, has pushed the INR toward near all-time lows. However, potential intervention by the Reserve Bank of India (RBI) through USD sales could help prevent the INR from falling below the 84 mark. Additionally, a drop in crude oil prices may mitigate further losses, as India is the world's third-largest oil consumer and importer.
Later on Thursday, the focus will shift to the US ISM Services Purchasing Managers Index (PMI), expected to ease to 51.1 in August from 51.4 in July. On Friday, attention will turn to the US Nonfarm Payrolls (NFP) report for August, which could provide insights into the Federal Reserve's plans for rate cuts this year.
Daily Digest Market Movers: Indian Rupee Appears Vulnerable Ahead of US NFP Report
According to a Reuters poll, the Indian Rupee was expected to strengthen from Wednesday’s rate of 83.96 to the dollar to 83.92 in one month and 83.75 in three months.
The HSBC India Services Purchasing Managers Index (PMI) rose to 60.9 in August, up from 60.3 in July, exceeding the market consensus of 60.4. This marks the highest PMI reading since March.
Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP, noted, “The Indian Rupee was once again held near 83.9750, its lowest closing, possibly by the RBI as it sold dollars to keep it just below the psychological level of 84.00. Risk-off sentiment drove continued dollar buying, while the RBI provided supply.”
The Job Openings and Labor Turnover Survey revealed that available positions fell to 7.67 million in July, compared to 7.91 million in June (revised from 8.1 million). This was below the market consensus of 8.1 million.
Atlanta Fed President Raphael Bostic indicated readiness to start cutting interest rates, despite inflation remaining above the US central bank’s target.
Markets are now pricing in a nearly 57% chance of a 25 basis points (bps) rate cut by the Fed in September, with a 43% probability of a 50 bps reduction, according to the CME FedWatch tool.
Technical Analysis: USD/INR Outlook Remains Bullish
The Indian Rupee weakens today. The daily chart shows the USD/INR pair is still within an ascending triangle pattern. However, the outlook remains positive as the price stays above the critical 100-day Exponential Moving Average (EMA), and the 14-day Relative Strength Index (RSI) is rising above the midline at around 59.55.
Key resistance is seen in the 84.00-84.05 range, which includes the psychological 84.00 level, the upper boundary of the triangle, and the high from September 4. A sustained move above this resistance could push the USD/INR toward 84.50.
On the downside, initial support is at the ascending triangle's base near 83.90. A break below this support might lead to a test of the 100-day EMA, currently at 83.63.
