- The Indian Rupee remains stable in early European trading on Wednesday.
- The RBI's Monetary Policy Committee opted to keep the repo rate steady at 6.5% during its October meeting.
- Declining crude oil prices and potential RBI intervention in the foreign exchange market could support the INR.
- Investors are now looking ahead to the release of the FOMC minutes later on Wednesday.
The Indian Rupee (INR) remains steady in Wednesday's trading. On Thursday, RBI Governor Shaktikanta Das delivered the central bank's fourth bi-monthly monetary policy statement, where the Reserve Bank of India kept the repo rate unchanged at 6.50% for the tenth consecutive meeting. However, the RBI’s Monetary Policy Committee (MPC) shifted its stance from "withdrawal of accommodation" to "neutral." The INR remained flat in immediate reaction to the policy decision.
Factors such as lower crude oil prices, stronger Asian currencies, and potential RBI foreign exchange interventions may provide some support for the INR. However, outflows from local equities and renewed demand for the US Dollar (USD) could limit the Rupee’s upside. Investors are also focused on the Federal Reserve's September meeting minutes, set to be released later on Wednesday.
Daily Digest Market Movers: INR Holds Steady Post-RBI Decision
- The RBI left its Consumer Price Index (CPI) inflation forecast for FY25 unchanged at 4.5%, while maintaining the GDP growth estimate at 7.2%.
- RBI Governor Shaktikanta Das emphasized that India's growth story remains intact, but inflation requires heightened vigilance.
- Deputy Governor Michael Patra highlighted that the central bank aims to navigate the current inflationary "hump" before considering any rate changes.
- J.P. Morgan analysts noted that rising oil prices, combined with USD strength, have heightened inflation risks in India, prompting significant RBI foreign exchange interventions in recent days.
- India's foreign exchange reserves hit a record high of $704.89 billion as of September 27, reflecting a $12.5 billion increase, according to the RBI.
- Federal Reserve Vice Chair Philip Jefferson mentioned that risks to the Fed's employment and inflation goals are now more balanced, while Boston Fed President Susan Collins suggested that inflation's weakening trend could lead to further rate cuts.
- Market expectations for a 25 basis point (bps) Fed rate cut in November have surged to 87%, up from 31.1% last week, according to the CME FedWatch Tool.
Technical Analysis: USD/INR’s Bullish Outlook Persists
The INR trades flat, while the USD/INR pair maintains a bullish stance above the descending trend line and the 100-day Exponential Moving Average (EMA) on the daily chart. The path of least resistance seems upward, with the 14-day Relative Strength Index (RSI) positioned above the midline at 55.70.
Key resistance for USD/INR is near the upper boundary of the rectangle, around the psychological mark of 84.00. Above that, resistance is seen at the all-time high of 84.15, followed by 84.50.
On the downside, the resistance-turned-support level at 83.90 offers initial support, with extended losses potentially targeting the 100-day EMA at 83.67. Further declines could push the pair down to the round figure of 83.00, the low from May 24.
