- The Indian Rupee edges higher during Monday’s early European session.
- India’s Wholesale Price Index (WPI) inflation increased to 1.84% YoY in September, up from 1.31% in August, though lower than the expected 1.90%.
- High oil prices and ongoing outflows from domestic stocks may pressure the INR, with potential RBI intervention to limit further losses.
- The US NY Empire State Manufacturing Index for October will be released later on Monday.
The Indian Rupee (INR) recovers some of its recent losses on Monday, following a dip to an all-time low in the previous session. India's Wholesale Price Index (WPI) inflation rose to 1.84% YoY in September, up from 1.31% in August, although it was below the expected 1.90%. Despite this softer-than-expected inflation data, the INR sees mild gains.
However, concerns over the recent surge in oil prices, coupled with significant foreign investor sell-offs in the equity market and increased demand for the US Dollar from foreign banks, could weigh on the local currency. Nevertheless, potential intervention by the Reserve Bank of India (RBI), through US Dollar sales by state-run banks, may help cap further downside for the INR. Later on Monday, the US NY Empire State Manufacturing Index for October will be released.
Daily Digest Market Movers: Indian Rupee Stabilizes, Upside Potential Limited
- "The Indian Rupee fell below the 84 per US Dollar mark for the first time due to heightened demand from foreign banks amid FII outflows and rising crude oil prices. Weakness in domestic markets also pressured the Rupee," noted Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
- US Producer Price Index (PPI) data showed a 1.8% YoY rise in September, slightly above the expected 1.6%, while the core PPI increased by 2.8% YoY, exceeding forecasts of 2.7%.
- On a monthly basis, the US PPI remained unchanged in September, with the core PPI up by 0.2%.
- Meanwhile, the preliminary reading of the US University of Michigan Consumer Sentiment Index dropped to 68.9 in October, down from 70.1 in September and below the expected 70.8. The 5-year consumer inflation expectations were pegged at 3.0% in September.
- Swaps markets now show an 86.8% chance of a 25 basis point rate cut by the Federal Reserve, up from 83.3% before the PPI data, according to the CME FedWatch Tool.
Technical Analysis: USD/INR’s Broader Trend Remains Constructive
The INR trades in positive territory on the day, but the overall outlook for USD/INR remains constructive. The pair continues to trade above the ascending trend line and the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 level at 64.20, indicating that the uptrend is more likely to continue rather than reverse.
The first key resistance level for USD/INR is near the all-time high of 84.15. A sustained move above this level could open the path for a test of 84.50.
On the downside, the support-turned-resistance level at 83.90 serves as the initial support. A break below this level could lead to a drop to the 100-day EMA at 83.69, followed by the psychological level of 83.00, which also marks the low of May 24.
