- The Indian Rupee strengthens during Tuesday's early European session.
- Regular RBI interventions bolster the INR, though portfolio outflows and a robust USD could limit further gains.
- Kansas City Fed President Jeffrey Schmid is scheduled to speak later today.
The Indian Rupee (INR) continues its upward momentum on Tuesday, supported by the Reserve Bank of India's (RBI) proactive measures to curb excessive depreciation. Additionally, recovering crude oil prices lend support to the INR, given India's status as the world's third-largest oil consumer.
However, persistent foreign fund outflows and renewed US Dollar (USD) demand pose downside risks to the Rupee. A general decline in Asian currencies also weighs on the INR. With no major US economic data releases scheduled for Tuesday, market focus will shift to risk sentiment and Federal Reserve official Jeffrey Schmid’s upcoming speech.
Key Factors Influencing the Indian Rupee
- Foreign Fund Outflows: Foreign investors have withdrawn $3.3 billion from Indian stocks and bonds so far in November, adding to the $11.4 billion outflow in October.
- Forex Reserves: India's foreign exchange reserves have declined for six consecutive weeks to $675.65 billion, down from a record $704 billion in late September.
- Economic Growth Projections: DBS Bank predicts India’s economic growth will slow to 6.0% in 2025 and 2026, compared to 8.2% in 2024. Meanwhile, Moody's Ratings forecasts a 7.2% growth rate in 2024, driven by recovering household spending and easing inflation.
- Global Economic Indicators: The National Association of Home Builders (NAHB) Housing Market Index in the US rose to 46.0 in November, its highest level since April, exceeding the forecast of 44.0.
USD/INR: Long-Term Bullish Outlook
The Indian Rupee shows intraday strength, but the USD/INR pair retains a bullish longer-term outlook. The pair remains above the 100-day Exponential Moving Average (EMA) on the daily chart, signaling strong support. Additionally, the 14-day Relative Strength Index (RSI) is positioned above the midpoint, around 67.00, suggesting a sustained upside bias.
The first significant barrier is the all-time high of 84.45. A clear break above this level could open the path to the psychological milestone of 85.00.
The resistance-turned-support zone at 84.35 provides initial support. A break below this level could target 84.00, with further losses exposing the 100-day EMA at 83.89.
The USD/INR pair remains poised for upward momentum, with technical and fundamental factors aligning to favor the Dollar in the longer term.
