Back to the Blog Main Page
29/10/24
43
Indian Rupee Faces Pressure Amid FII Outflows and US Bond Yields
The Indian Rupee experienced a decline during Tuesday’s trading session in Asia, primarily due to persistent outflows from foreign institutional investors (FIIs) and rising US bond yields. These factors have added pressure on the rupee, although potential interventions by the Reserve Bank of India (RBI) could mitigate some of these losses. Recent developments in the US political landscape, particularly with rising speculation regarding Donald Trump’s presidential campaign, have further influenced market sentiment negatively.
Despite the rupee’s depreciation, easing crude oil prices might provide a cushion for the currency, potentially limiting the extent of its decline. The RBI is expected to take measures to stabilize the rupee, such as selling US dollars through public sector banks, which may help support the local currency against further losses.
As traders look ahead, critical US economic data will be closely watched this week. Upcoming releases include the advanced Gross Domestic Product (GDP) figures for the third quarter, the Personal Consumption Expenditures (PCE) Price Index for September, and the highly anticipated Nonfarm Payrolls (NFP) report. These indicators are crucial as they will influence monetary policy expectations and market conditions.
October has marked a significant period for foreign investment in India, with withdrawals totaling $10 billion from equity and debt markets — the highest level of selling this year. Economic analysts suggest that the Indian economy may be entering a cyclical growth slowdown, which raises concerns about the RBI’s optimistic GDP growth forecast of 7.2%. Recent assessments indicate that economic expansion could fall between 6.5% and 7.0% for the current fiscal year.
Market speculation surrounding the Federal Reserve’s rate decisions has intensified, with forecasts suggesting a near certainty of a 25 basis points rate cut in upcoming meetings. The Indian Rupee remains under pressure, with technical indicators signaling that the USD/INR pair may trend toward higher levels if key resistance points are breached. Conversely, sustained trading below certain thresholds could prompt further declines in the rupee’s value.
Promotions
