USD/INR stabilizes following India’s PMI data, with attention turning to the final day of the BRICS Summit

The Indian Rupee (INR) steadied against the US Dollar (USD) on Thursday, with the USD/INR pair trading within the narrow range of 84.00-84.10. Market interventions by the Reserve Bank of India (RBI) helped mitigate downside risks for the INR, despite persistent outflows from Indian equities.

India’s HSBC Composite Purchasing Managers Index (PMI) rose to 58.6 in October, up from 58.3 in September, signaling continued robust growth in the private sector, driven by expansions in both manufacturing and services.

The Rupee faced downward pressure as Foreign Institutional Investors (FII) remained net sellers of Indian stocks for the 18th consecutive session on Wednesday, redirecting funds to China due to its recent stimulus measures and more attractive valuations. The Nifty 50 index has dropped 1.7% over the past three sessions and is down about 6% from last week’s record highs, weighed by disappointing corporate earnings.

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping held their first formal talks in five years on the sidelines of the BRICS summit in Russia. During their meeting on Wednesday, the leaders agreed to strengthen communication and cooperation, seeking to resolve ongoing disputes and improve relations strained by the deadly 2020 military clash, according to Reuters.

Daily Digest Market Movers: Indian Rupee Holds Steady Amid Potential RBI Intervention

• The US Dollar experienced downward pressure following the release of the Federal Reserve’s Beige Book on Wednesday, which reported that economic activity remained “little changed in nearly all Districts.” This contrasts with August’s report, where three Districts showed growth and nine had flat activity.
• The CME FedWatch Tool indicates an 88.9% probability of a 25-basis-point rate cut, with no expectations for a larger 50-basis-point reduction.
• Preliminary data shows India’s HSBC Manufacturing PMI rose to 57.4 in October, up from 56.5 in September, while the Services PMI increased to 57.9, rebounding from a one-year low of 57.7. This marks the 39th consecutive month of expansion in the services sector.
• Jim O’Neill, the economist who coined the term BRIC in 2001, told Reuters that the idea of the BRICS bloc challenging the US Dollar is unrealistic as long as China and India remain divided and unwilling to collaborate on trade.
• Minutes from the Monetary Policy Committee (MPC) meeting in October reveal that members urged caution in lowering interest rates, warning that India cannot afford another bout of inflation.
• Speaking at the New York Fed Central Banking Seminar, RBI Deputy Governor Michael Patra emphasized that India’s best defense against global risks is to strengthen macroeconomic fundamentals and build sufficient buffers through prudent policies. He noted that the central bank has been bolstering its foreign exchange reserves, now equivalent to roughly 12 months’ worth of imports.
• Federal Reserve Bank of San Francisco President Mary Daly posted on social media that the US economy is in a better position, with inflation declining significantly and the labor market stabilizing.
• Minneapolis Fed President Neel Kashkari cautioned on Monday that the central bank is closely monitoring the US labor market for signs of instability. He advised investors to expect a gradual pace of rate cuts, suggesting that monetary easing will likely be moderate rather than aggressive.

Technical Analysis: USD/INR Finds Support Around 84.00, Nine-Day EMA

The USD/INR pair remained stable above 84.00 on Thursday, with the daily chart showing that the pair is trading within an ascending channel, indicating a bullish bias. The 14-day Relative Strength Index (RSI) is nearing 70, further reinforcing this upward momentum.

On the resistance side, the pair may encounter challenges at its all-time high of 84.14, last reached on August 5. A breakout above this level could push the USD/INR pair towards the upper boundary of the ascending channel, around 84.20.

In terms of support, the pair finds immediate backing at the nine-day Exponential Moving Average (EMA) near 84.02, aligning with the lower boundary of the ascending channel and the psychological level of 84.00.

USD/INR: Daily Chart