August 22, 2024
New Delhi, India
USDINR Analysis
The Indian Rupee (INR) has experienced continued pressure against the US Dollar (USD), falling by 0.2% in August, marking it as the worst-performing Asian currency this month. As mixed PMI data from India offers little support, market participants turn their attention to the upcoming RBI Monetary Policy Committee (MPC) Minutes and US economic data. In Thursday’s Asian session, the INR lost further ground, weakened by persistent challenges including a widening trade deficit, foreign equity outflows, and strong USD demand from importers.
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PMI Data Impact: India’s PMI data for August presented a mixed picture, offering limited support to the INR. The preliminary HSBC India Manufacturing PMI eased slightly to 57.9 in August from 58.1 in July, while the Services PMI edged up to 60.4 from 60.3. Despite these movements, the INR saw little positive reaction, remaining under pressure in the currency markets.
Crude Oil and RBI Intervention: On the upside, the continued decline in crude oil prices may provide some support to the INR, as India remains one of the world’s largest oil consumers and importers. Additionally, there is speculation that the Reserve Bank of India (RBI) might intervene by selling USD to stabilize the Rupee, potentially limiting further downside for the currency.
Global Factors: Globally, attention is also focused on the US economy, with traders awaiting the release of the Federal Reserve’s July meeting minutes and the preliminary US S&P Global Purchasing Managers Index (PMI) for August. The Fed’s minutes revealed that “the vast majority” of participants are considering a rate cut in September, contingent on economic data trends. Markets are currently pricing in a September rate cut, with expectations of a full percentage point reduction by the end of the year.
Looking Ahead: Investors will closely monitor the RBI’s MPC Minutes, set to be released on Thursday, for further clues on India’s monetary policy direction. Additionally, the advanced US August PMI data will be pivotal in assessing the strength of the US economy and its implications for the USD/INR pair.
As the Indian Rupee remains under pressure due to both domestic and global factors, upcoming events like the RBI MPC Minutes and US economic data releases will be critical in shaping the currency’s near-term outlook. While the mixed PMI data offers little respite, potential RBI intervention and global rate cut expectations could influence the INR’s performance in the coming days.
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