The Indian Rupee has lost traction due to mixed sentiment. Economists expect the GDP growth in July-September to be higher than the RBI’s prediction of 6.5%. Investors are keeping an eye on the US Building Permits and Housing Starts on Friday. The Indian Rupee (INR) is trading cautiously, and the Reserve Bank of India’s monthly bulletin reported that festival-related demand in India has been strong, and consumer sentiment is upbeat. However, economists caution that there is still work to be done on the inflation front, and India is not out of the woods yet.
There is a wide consensus supported by economists that Indian GDP growth in the third quarter (Q3) 2023-24 will outperform the projections of the central bank. Nonetheless, the Indian Rupee remains vulnerable to higher crude prices and US Treasury bond yields. Market players will be monitoring the US housing data, including Building Permits and Housing Starts.
India’s trade deficit widened to $31.46B in October due to a sharp rise in gold imports during the festival season. Export and import figures also saw notable changes. Inflation levels also saw some fluctuations, with some falling and others not meeting market expectations. The US economy also saw fluctuations, with Initial Claims reaching the highest level in nearly three months and Continuing Jobless Claims reaching the highest level since 2022. The US Industrial Production also saw a decline, below market expectations.
Technically, the Indian Rupee maintains a bearish outlook, and the USD/INR pair has been trading in a wider trading band since September. The upper boundary of the trading range acts as the immediate resistance level for the pair. The continuation of the upward bias could see the rally to a year-to-date (YTD) high. A decisive break would expose the psychological round figure at 84.00. On the contrary, the initial support level for USD/INR is located near a low of September 12.
The Reserve Bank of India (RBI) plays a critical role in maintaining price stability and exchange rate levels that will not cause excess volatility for exporters and importers. It formally meets at six bi-monthly meetings a year to discuss its monetary policy. When inflation is too high, the RBI will normally raise interest rates, and vice versa.
In addition, the table and FAQs are provided to give more insight into the current state of the Indian Rupee and the Reserve Bank of India’s role in maintaining the economic stability of the country.
