09/09/24

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The Indian Rupee (INR) is anticipated to encounter significant pressure due to concerns about a potential slowdown in the US economy, which is fostering a general sentiment of risk aversion among traders. The INR has shown resilience in recent trading sessions but may struggle to maintain strength, particularly if the USD/INR pair climbs toward the 84.00 level. Traders are watching closely for possible interventions from the Reserve Bank of India (RBI) aimed at stabilizing the currency.

Last week, the RBI likely took action to support the rupee amidst rising oil prices that could further complicate matters for India, as the nation is heavily reliant on oil imports. Recent US labor data has bolstered the US Dollar, decreasing the chances of a significant rate cut from the Federal Reserve in September. The latest Nonfarm Payrolls report indicated that the US added 142,000 jobs in August, which, while below expectations, still represented an improvement over the prior month.

Market estimations suggest that a 25 basis point rate cut from the Federal Reserve is almost certain, although the chances of a more substantial 50 basis point cut have slightly decreased. Federal Reserve officials are starting to align with market expectations regarding potential adjustments in policy rates, hinting at an imminent change.

On the economic front, India’s foreign exchange reserves reached an all-time high of $683.99 billion. This increase is driven by significant foreign investment into Indian assets following their inclusion in a major emerging market debt index, which highlights India’s growing economic appeal.

The latest data reveal mixed signals in the US labor market, including a decline in job openings. Meanwhile, India’s economic outlook appears optimistic, with the World Bank raising its growth forecast for the current financial year to 7%. This positive news is largely attributed to robust growth within the service sector, indicating strong domestic business activity.

From a technical perspective, the USD/INR remains close to the 84.00 level, with the daily chart suggesting consolidation within a symmetrical triangle pattern that may signify lower volatility ahead. Immediate support levels are observed around 83.92 and 83.90, while any break above 84.00 could lead the pair to explore higher levels, suggesting a potential continuation of the bullish trend.