- The Indian Rupee remains steady as traders anticipate RBI intervention to bolster the domestic currency.
- The USD/INR pair may strengthen if Asian markets decline amid growing concerns about the US economy.
- The US Dollar gains support as uncertainty grows regarding the scale of the Fed's rate cut in September.
The Indian Rupee (INR) remained steady against the US Dollar (USD) on Tuesday, with traders speculating that the Reserve Bank of India (RBI) may have intervened in the foreign exchange market to support the domestic currency and prevent it from weakening beyond the 84.00 level.
In the near term, the USD/INR pair could see gains as a broader decline in Asian equities and currencies unfolds, driven by increasing concerns about a potential slowdown in the US economy. However, lower oil prices might help mitigate downward pressure on the INR, as India, the world's third-largest oil consumer and importer, could benefit from reduced import costs.
The US Dollar strengthened due to the diminished likelihood of an aggressive interest rate cut by the Federal Reserve (Fed) at its September meeting. According to the CME FedWatch Tool, the probability of a 50 bps rate cut has slightly decreased to 29.0%, down from 30.0% a week ago.
Daily Digest Market Movers: Indian Rupee Steadies Amid Potential RBI Intervention
- Chicago Fed President Austan Goolsbee commented on Friday that Fed officials are beginning to align with the broader market's expectation of an imminent policy rate adjustment by the US central bank, as reported by CNBC. FXStreet’s FedTracker, which uses a custom AI model to evaluate Fed officials' speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee's remarks as dovish, giving them a score of 3.2.
- India's foreign exchange reserves reached a record high of $683.99 billion as of August 30, up from $681.69 billion previously. This increase is largely attributed to a significant influx of foreign currency into the Indian economy, driven by strong economic growth and the long-anticipated inclusion of Indian assets in JPMorgan's major emerging market debt index, which has boosted foreign investment.
- The ADP Employment Change report released on Thursday showed that private-sector employment rose by 99,000 in August, following a 111,000 increase in July, but fell short of the 145,000 estimate. Meanwhile, US Initial Jobless Claims for the week ending August 30 rose to 227,000, down from the previous week's 232,000 and below the initial consensus of 230,000.
- “The Composite PMI for India continued to indicate strong growth in August, spurred by accelerated business activity in the service sector, which saw its fastest expansion since March. This growth was primarily driven by an increase in new orders, particularly from the domestic market,” said Pranjul Bhandari, Chief India Economist at HSBC.
- The World Bank has raised India's growth forecast to 7% for the current financial year (FY25), up from its earlier projection of 6.6%.
Technical Analysis: USD/INR Holds Below 84.00, Testing Support at Nine-Day EMA
On Tuesday, the Indian Rupee hovered around the 84.00 level. The daily chart analysis reveals that the USD/INR pair is consolidating within a symmetrical triangle pattern, indicating reduced volatility and a consolidation phase. Despite this, the 14-day Relative Strength Index (RSI) remains above 50, suggesting that the bullish trend is still intact.
On the downside, immediate support is provided by the nine-day Exponential Moving Average (EMA) at 83.91, which aligns with the lower boundary of the symmetrical triangle near 83.90. A break below this level could signal a bearish shift, potentially driving the USD/INR pair down toward its six-week low around 83.72.
On the resistance side, the USD/INR pair is currently testing the upper boundary of the symmetrical triangle near the 84.00 level. A breakout above this resistance could propel the pair toward the all-time high of 84.14, reached on August 5.
USD/INR: Daily Chart
