- The Indian rupee has attracted some sellers in early European trade on Friday.
- Continued strength in the US dollar and concerns about a slowdown in the Indian economy continue to weigh on the Indian rupee.
- The US December ISM Manufacturing PMI will be closely monitored.
The Indian rupee (INR) widened its decline on Friday after closing at record low levels for eight consecutive sessions. The local currency remains under pressure due to strong demand for the US dollar (USD) in the non-deliverable forward (NDF) market and growing arbitrage with India's onshore markets. Furthermore, India's sluggish growth rate, widening trade deficit, and slowing capital inflows are also contributing to the downside of the Indian rupee.
Nevertheless, the Reserve Bank of India (RBI) may step in to provide short-term relief to the Indian rupee by selling the US dollar. Traders are awaiting fresh stimulus from the US December ISM Manufacturing Purchasing Managers Index (PMI) to be released on Friday. Richmond Fed President Thomas Barkin is also scheduled to speak later in the day.
Indian rupee depreciates further despite RBI intervention
- The rupee is likely to depreciate slightly in 2025 due to volatile foreign portfolio investment (FPI) flows and a possible strengthening of the US dollar, according to a Bank of Baroda report.
- Traders confirmed that the state-run bank sold between $800 million and $1 billion worth of U.S. dollars.
- India's HSBC Manufacturing PMI in December was 56.4, down from 57.4 in November and the lowest in 2024. This number was lower than the expected 57.8.
- “Indian manufacturing activity ended a strong 2024 on a weak note amid growing signs of a gradual slowdown in the industrial sector. New orders expanded at the slowest rate this year, slowing future production growth. It suggests that it will.” HSBC economist Ines Lam said:
- The U.S. received 210,000 new unemployment claims for the week ending Dec. 28, compared with 220,000 the previous week (revised from 219,000), the U.S. Department of Labor (DOL) said Thursday. The number of cases decreased to 1,000. This number was below the market consensus of 222,000.
USD/INR remains strong, RSI is overbought and bulls are cautious
The Indian rupee traded with a negative bias on the day. According to the daily chart, the strong uptrend remains intact since the USD/INR pair broke out of the uptrend channel last week. The path of least resistance is to head higher as the pair is above the important 100-day exponential moving average (EMA).
However, the 14-day Relative Strength Index (RSI) is above 70, suggesting overbought conditions and further consolidation cannot be ruled out before bracing for a near-term USD/INR rally. suggests.
In a bullish event, the first upside wall appears at the all-time high of 85.81. A continuation of trading above the aforementioned levels could pave the way to the psychological mark of 86.00.
On the downside, the first support level for USD/INR is located at the 85.54 level, which has turned from resistance to support. If this level is broken, there is a possibility of a fall to the overview value of 85.00. The next level of contention to look at is the 100-day EMA at 84.40.
