- The Indian Rupee weakens during Tuesday's early European session.
- The August HSBC Manufacturing PMI for India registered at 56.5, down from the previous 57.5, falling short of expectations.
- Renewed demand for the USD, fluctuating crude oil prices, and foreign fund outflows are putting pressure on the INR.
- All eyes will be on the US ISM Manufacturing PMI for September, set to be released on Tuesday.
The Indian Rupee (INR) remains in negative territory for the third consecutive day on Tuesday. Data released earlier in the day showed the HSBC India Manufacturing Purchasing Managers Index (PMI) dropped to 56.5 in September, falling short of both the market consensus of 56.7 and the previous reading of 57.5. The local currency weakened in response to the disappointing PMI figures.
The INR's decline is further exacerbated by strong US Dollar (USD) demand from foreign banks. Additionally, volatile crude oil prices, fueled by rising tensions in the Middle East, and ongoing foreign fund outflows are adding pressure on the currency.
However, expectations of potential interest rate cuts by the Federal Reserve may limit the USD/INR pair's upside. Investors are also focused on the upcoming US ISM Manufacturing PMI, set to be released on Tuesday, along with speeches from Fed officials Raphael Bostic and Lisa Cook.
Daily Digest Market Movers: Indian Rupee remains under pressure amid global influences
- "After seeing some appreciation, the rupee has started drifting back toward its usual range, driven by month-end dollar demand from importers and the RBI's active management of the currency," said Amit Pabari, managing director at FX advisory firm CR Forex.
- India’s current account balance fell into a deficit of $9.7 billion for the April-June quarter (Q1) of FY 2024-25, representing 1.1% of GDP, according to the Reserve Bank of India (RBI).
- Fed Chair Jerome Powell stated on Monday that the recent half-percentage point interest rate cut should not be seen as an indicator of equally aggressive future actions. He added that further cuts are likely but will depend on the economy’s performance.
- Powell emphasized that the Fed's current focus is on maintaining a stable economy and job market, rather than preventing a recession or rescuing a struggling economy.
- Interest rate futures contracts indicate a 35.4% chance of a half-point cut in November, compared to a 64.6% likelihood of a quarter-point cut, according to the CME FedWatch Tool.
Technical Analysis: USD/INR maintains a positive outlook
The Indian Rupee remains weak, while the USD/INR pair continues to hold a bullish stance on the daily chart, trading above the key 100-day Exponential Moving Average (EMA). However, some consolidation may occur as the 14-day Relative Strength Index (RSI) hovers near the midline, signaling neutral momentum.
The 84.00 psychological level is proving to be a significant resistance for USD/INR bulls. A clear break above this threshold could trigger a rally toward 84.15, the August 5 high, with the next resistance at 84.50.
On the downside, the 100-day EMA at 83.62 serves as initial support. If losses extend, the pair could decline further toward 83.00, a key psychological level and the low from May 24.
