December 27, 2023

New Delhi, India

Optimistic Economic Forecasts Boost Indian Rupee:

Amid the holiday season’s thin trading, the Indian Rupee is showcasing strength against the US Dollar, driven by optimistic economic forecasts. Fitch Ratings’ latest report highlights a predicted GDP growth of 6.5% for India during the fiscal year 2024–25. The credit rating agency foresees this robust economic growth bolstering corporate demand, effectively offsetting challenges in the global market.

Market Insights and Current Conditions: While the Rupee remains strong, investors are closely monitoring potential risk factors. Food inflation developments and the upcoming general elections in 2024 are key considerations in shaping future economic policies. In the final week of 2023, market sentiment is expected to continue influencing currency movements, emphasising a cautious approach among traders.

India’s Economic Resilience: The Reserve Bank of India reports a narrowed current account deficit of $8.3 billion in the second quarter of 2023-24. Notably, India’s stock markets have surpassed a market capitalisation of $4 trillion, with the benchmark Nifty50 registering a 17% return this year. India’s total trade in GDP has expanded significantly from around 15% in the early 1990s to nearly 50% in 2022, showcasing the country’s economic resilience.

Foreign Currency Reserves and Global Standing: India’s foreign currency reserves, standing at $606.9 billion on December 8, 2023, have climbed by $28.4 billion between 2023 and 2024. This positions India as the fourth-largest holder of foreign exchange reserves globally, emphasizing the country’s strong economic fundamentals.

Also Read: India’s Stock Market Soars: Outpaces Global Peers with 25% Valuation Gain

Technical Analysis of USD/INR:

From a technical standpoint, the USD/INR pair remains within a range of 82.80–83.40. Holding above the key 100-period Exponential Moving Average (EMA) on the daily chart indicates an upward bias. However, the 14-day Relative Strength Index (RSI) below the 50.0 midpoint suggests a vulnerability in the shorter-term bullish outlook.

Future Currency Movements and Key Levels: A potential break above the upper boundary at 83.40 could pave the way for further upside, targeting the year-to-date high of 83.47 and the psychological mark of 84.00. Conversely, key support levels at 83.00 and 82.80 come into play. A decisive break below 82.80 might lead to a drop to the low of August 11 at 82.60.

In summary, a combination of positive economic forecasts, strong market indicators, and technical analysis contributes to the Indian Rupee‘s strength against the US Dollar, providing valuable insights for traders and investors.