- The Indian Rupee faces selling pressure in early European trading on Friday.
- Persistent USD strength and concerns over India’s economic slowdown weigh on the INR.
- Investors await the US ISM Manufacturing PMI for December for further insights.
The Indian Rupee (INR) continues its losing streak on Friday, closing at record lows for the eighth consecutive session. Heavy US Dollar (USD) demand in the non-deliverable forward (NDF) market has widened the arbitrage with India’s onshore market, adding pressure to the INR. Contributing factors include India’s slower growth rate, a widening trade deficit, and declining capital inflows.
The Reserve Bank of India (RBI) may intervene in the foreign exchange market to sell USD and provide temporary relief to the INR. Meanwhile, traders await the US ISM Manufacturing PMI for December and comments from Federal Reserve Bank of Richmond President Thomas Barkin later in the day for additional cues.
Indian Rupee further weakens despite RBI’s intervention
- Bank of Baroda projects slight INR depreciation in 2025, citing volatile foreign portfolio investments (FPI) and a stronger USD.
- State-run banks reportedly sold $800 million to $1 billion to support the Rupee.
- India’s HSBC Manufacturing PMI fell to a 2024 low of 56.4 in December, below November’s 57.4 and the forecasted 57.8.
- “India’s manufacturing activity ended 2024 on a softer note, with slower expansion in new orders pointing to weaker future production,” said Ines Lam, economist at HSBC.
- US Initial Jobless Claims for the week ending December 28 declined to 211K, below expectations of 222K and the prior week’s revised figure of 220K, signaling labor market strength.
USD/INR keeps firm tone, overbought RSI warrants caution for bulls
The Indian Rupee maintains a negative tone as the USD/INR pair holds a strong uptrend. The pair remains above the ascending trend channel and key 100-day Exponential Moving Average (EMA), reinforcing bullish momentum.
However, the 14-day Relative Strength Index (RSI) above 70 indicates an overbought condition, suggesting potential consolidation before further USD/INR appreciation.
Upside targets:
- Immediate resistance is at the all-time high of 85.81.
- Sustained gains could push the pair toward the psychological level of 86.00.
Downside support levels:
- Initial support is at 85.54 (resistance-turned-support).
- Further downside could test 85.00, followed by the 100-day EMA at 84.40.
