- The Indian rupee fell to a new record low in early European trading on Friday.
- A strong US dollar and end-of-month demand for US dollars from importers weighed on the Indian rupee.
- The RBI is likely to intervene in the foreign exchange market to prevent further depreciation of the domestic currency.
The Indian rupee (INR) extended its decline to near new all-time lows on Friday. The local currency remains under selling pressure due to continued strong demand for the US dollar (USD) from importers, foreign investors and oil companies.
Nevertheless, periodic interventions by the Reserve Bank of India (RBI) could help limit INR losses. Preliminary figures for the US goods trade balance for November are expected to be released later on Friday. Trading volumes are expected to be weak ahead of next week's New Year holiday.
Amid a mix of global and domestic challenges, the Indian rupee weakens to near record lows
- According to the Ministry of Finance's monthly economic report for November, India's economy is expected to grow at around 6.5% in 2024/25, near the lower end of the 6.5% to 7.0% forecast.
- Foreign institutional investors (FIIs) were net sellers in the capital market on Tuesday, selling shares worth Rs 2,454.21 billion, according to exchange data.
- “Importers were quite active during trading, but volumes were relatively low towards the end of the year,” said a trader at a private bank.
- According to a recent report by Standard Chartered Bank, “Slower FDI flows, slower manufacturing export growth and a narrowing policy rate differential with the US are likely to put pressure on the INR.Standard Chartered The bank expects INR to decline moderately and reach $85.5 to $1 in next year's 12 months.
- The number of weekly new jobless claims in the United States for the week ending Dec. 21 was 219,000, down from 220,000 the previous week, the U.S. Department of Labor said Thursday. This number was below the market consensus of 224,000.
Constructive outlook remains for USD/INR
The Indian rupee depreciated on this day. Technically, the price trend shows a strong uptrend on the daily time frame, with the pair well supported above the important 100-day exponential moving average (EMA). However, the 14-day Relative Strength Index (RSI) is hovering around 74.25, suggesting overbought conditions. This means further consolidation should not be ruled out before preparing for near-term USD/INR appreciation.
For bulls, the top of the ascending channel at 85.35 serves as an immediate resistance level for the pair. If it continues to trade above this level, more buyers will gather and the price could rise to 85.50 on its way to the psychological level of 86.00.
On the contrary, a potential support level for USD/INR appears in the 85.05-85.00 area, representing the trend channel and the lower bound of the round mark. A decisive break below the mentioned levels could prompt momentum sellers to step in and push the price higher towards the 100-day EMA at 84.27.
