October 17, 2024
New Delhi, India
USDINR Analysis
On Thursday, the Indian Rupee (INR) traded with mild losses against a stronger US Dollar (USD). The pressure on the INR is largely driven by significant outflows from Indian equities and heightened USD demand from foreign banks and importers.
Key Factors Impacting the INR:
- Foreign Fund Outflows: Foreign portfolio investors have withdrawn more than $7 billion from Indian equities through October 14, marking the largest outflow in over four years.
- USD Demand: Higher USD demand from importers and foreign banks is contributing to the INR’s softness.
Despite the selling pressure, a few factors could offer support to the Indian Rupee:
- Crude Oil Prices: A decline in crude oil prices amid reduced fears of supply disruptions in the Middle East could benefit the INR, given that India is the world’s third-largest oil consumer.
- RBI Interventions: The Reserve Bank of India’s (RBI) routine foreign exchange interventions may limit the downside for the Indian Rupee.
India’s Trade Data:
- Trade Deficit: India’s trade deficit narrowed to $20.78 billion in September from $29.65 billion in August.
- Exports and Imports: Exports marginally increased to $34.58 billion, while imports declined to $55.36 billion, compared to $64.36 billion in the prior period.
Upcoming US Data:
Traders are keenly awaiting key US economic data due on Thursday, including:
- US Retail Sales (September): Expected to rise to 0.3% from the previous 0.1%.
- US Initial Jobless Claims, Industrial Production, and Philadelphia Fed Manufacturing Survey: These releases could further influence USD/INR movement.
Fed Rate Outlook:
According to the CME FedWatch tool, traders have priced in a 94% chance of a 25 basis points (bps) rate cut by the Federal Reserve in November.
USD/INR Outlook:
The USD/INR is trading with mild gains as markets brace for the US Retail Sales report, with continued selling of domestic equities by foreign portfolio investors weighing on the INR.
Disclaimer:
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