- The Indian Rupee softens in early European trading on Monday.
- India’s HSBC Manufacturing PMI rose to 57.5 in October from 56.5 previously, exceeding expectations.
- Ongoing selling by foreign investors continues to pressure the INR.
The Indian Rupee (INR) eased on Monday as persistent foreign outflows from domestic equities and rising crude oil prices applied downward pressure. However, a softening US Dollar (USD) due to potential position unwinding ahead of the US presidential election might help limit INR’s decline.
Recent data released on Monday revealed an improvement in India’s HSBC Manufacturing PMI, which rose to 57.5 in October, exceeding both the market forecast of 57.4 and the previous reading of 56.5. The Rupee showed resilience in response to this upbeat PMI release.
This week’s US presidential election and the Federal Reserve’s (Fed) interest rate decision are expected to drive market volatility. The Fed is anticipated to cut rates by 25 basis points at its November meeting on Thursday.
Daily Digest Market Movers: Indian Rupee softens as US election looms
- The BSE Sensex and Nifty 50 indexes fell by around 1.5% each, influenced by foreign selling and caution ahead of the US election outcome.
- “India’s headline manufacturing PMI rose significantly in October as economic conditions continue to improve,” said Pranjul Bhandari, HSBC’s chief India economist.
- The Reserve Bank of India (RBI) is reportedly selling US Dollars near 84.1125-84.1150 levels, according to Reuters.
- A Reuters poll suggests that the Indian Rupee will trade within a narrow range against the USD over the next year, supported by the RBI’s regular FX interventions.
- “The FX interventions have been ongoing since post-COVID, with two-sided interventions expected to continue,” remarked Vivek Kumar, an economist at QuantEco Research.
- The US October Nonfarm Payrolls report showed a weaker-than-expected increase of 12K, well below the anticipated 113K. Meanwhile, the Unemployment Rate remained at 4.1%.
- “A Trump victory is widely expected to be positive for the USD, though some believe this outcome is already priced in,” commented Chris Weston, an analyst at Pepperstone.
Technical Analysis: USD/INR maintains bullish outlook in the long term
The Indian Rupee weakened on the day, but the positive trend for USD/INR remains intact, with the pair trading above the 100-day Exponential Moving Average (EMA). The bullish momentum is reinforced by the 14-day Relative Strength Index (RSI), which stands above the midpoint at 57.70.
Key resistance for USD/INR is seen at the upper boundary of the ascending trend channel near 84.24. A breakout above this level could fuel further gains toward 84.50, with the next target at the psychological 85.00 level.
On the downside, a sustained close below the trend channel’s lower boundary near 84.05 could open the door to the 100-day EMA at 83.78.
