Indian Rupee Strengthens as USD Faces Headwinds: Key Factors Unveiled

Indian Rupee

December 18, 2023

New Delhi, India

Indian Rupee Gains Momentum Amidst Global Market Dynamics

In a recent turn of events, the Indian Rupee (INR) has demonstrated resilience, making significant gains against the US Dollar (USD). Several factors contribute to this upward trajectory, creating a buzz in the forex market.

Equity Inflows Propel INR: A Record-Breaking December

Foreign investors injected a substantial $5.1 billion into Indian shares in December, marking the highest equity inflows since July. This surge has played a pivotal role in boosting the Indian Rupee, which recorded its most substantial single-day gain in over eight months.

Monetary Policies in Focus: RBI and Fed Perspectives

While the Reserve Bank of India (RBI) decided to maintain unchanged interest rates on December 8, Governor Shaktikanta Das clarified that it doesn’t signal a shift towards a neutral stance due to lingering inflation concerns. On the other side of the spectrum, the Federal Reserve (Fed) kept short-term interest rates unchanged, hinting at a pause in rate hikes.

Global Economic Indicators and Housing Data Awaited

Market players are closely eyeing the US Building Permits and Housing Starts data scheduled for Tuesday. Additionally, the Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred inflation gauge, is anticipated on Friday. These releases are expected to influence further movements in the USD/INR pair.

Technical Analysis: USD/INR Trading Range and Trends

The USD/INR pair has been stuck in a range between 82.80 and 83.40 since September. Technical indicators reveal a downside momentum, with the pair below the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) signaling a bearish trend.

A decisive break below the critical support level of 83.00 could trigger a further decline, targeting levels at 82.80 and 82.60. Conversely, overcoming the immediate upside barrier at 83.40 may pave the way for a push towards the year-to-date high of 83.47.

Indian Economic Landscape: Resilience and Growth

India’s economic indicators also contribute to the INR’s strength. Foreign exchange reserves rose to a four-month high of $606.859 billion, and the Nifty 50 index achieved a remarkable 16% growth in 2023, solidifying India’s position as the seventh-largest stock market globally.

Read the full story here: India’s Forex Reserves Soar Beyond $600 Billion Mark, Indicating Economic Resilience

Outlook and Closing Thoughts

As the Indian Rupee continues its positive trajectory, market participants are keenly watching the interplay between global economic factors. With uncertainties in the US and robust Indian economic indicators, the USD/INR pair remains a focal point for traders in the coming weeks.

Also Read: Sovereign Gold Bond Series III 2023-24 Opens Today: Key Details


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