11/09/24

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The Indian Rupee (INR) is maintaining a stable position amidst increasing expectations of interventions in foreign exchange markets by the Reserve Bank of India (RBI). Lower crude oil prices are benefiting the INR, as India is one of the largest consumers and importers of oil globally. The US Dollar (USD) has weakened further, driven by declining Treasury yields in anticipation of upcoming Consumer Price Index (CPI) data.

The USD/INR exchange rate is currently fluctuating around the 84.00 level. Market participants are speculating on potential RBI interventions designed to bolster the INR and prevent it from surpassing this key resistance level. The Indian Rupee is experiencing some support against the USD, particularly due to the recent slide in crude oil prices. Analysts have noted that concerns over declining global demand have resulted in Brent crude futures hitting their lowest price since December 2021, dropping to $64.75 per barrel.

Current trends suggest challenges for the US Dollar as Treasury yields decrease ahead of the anticipated inflation report. This CPI data is expected to provide insights into the scale of the Federal Reserve’s interest rate cuts in September. Market forecasts indicate a strong expectation for a 25 basis point cut, while the probability of a more substantial 50 basis point cut has decreased slightly.

In Indian financial markets, there have been calls from investors for the government to enhance the issuance of short-term and green bonds, as well as to restart auctions for floating-rate bonds. These discussions center on the federal government’s borrowing strategy for the latter half of the fiscal year.

India’s foreign exchange reserves have recently reached a record high of $683.99 billion, primarily fueled by significant foreign investment linked to the country’s economic growth and inclusion in a major emerging market debt index. This influx of capital reflects growing confidence in India’s economic stability.

As for technical analysis, the USD/INR continues to hover near the 84.00 level while forming a symmetrical triangle pattern, indicating a phase of consolidation. Key support is noted at approximately 83.90, with any drop below this level potentially signaling a bearish turn for the pair. Conversely, a breakout above 84.00 could indicate a move towards previous highs, with the all-time peak observed at 84.14 on August 5.