February 18, 2024
New Delhi, India
USDINR
The Indian Rupee (INR) weakened during Tuesday’s early European session, driven by foreign institutional investor (FII) outflows, a stronger US Dollar (USD), and domestic market weakness. Analysts predict a negative bias for the INR unless the Reserve Bank of India (RBI) intervenes to limit losses.
Key Factors Influencing the Rupee:
FII Outflows and Trade Deficit:
- India’s trade deficit widened to $22.99 billion in January, up from $21.94 billion in December.
- Exports stood at $36.43 billion, while imports surged to $59.4 billion.
- Gold imports declined due to high global prices, providing limited relief.
Strengthening US Dollar and Global Trade Fears:
- The USD index recovered from intraday lows, pressuring emerging market currencies like the INR.
- Fears of a global trade war resurfaced after US President Donald Trump reiterated plans for auto tariffs starting April 2.
Domestic Market Weakness:
- Indian equities exhibited a weak tone, adding to the INR’s downward pressure.
- According to Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, the INR’s decline was cushioned by softening crude oil prices and lower US Treasury yields.
RBI Intervention and Market Outlook:
The RBI is expected to step in if the INR’s decline becomes significant. Meanwhile, investors are awaiting the release of the NY Empire State Manufacturing Index and comments from Federal Reserve official Mary Daly, both scheduled for later today.
Outlook: The INR is likely to remain under pressure as global trade concerns, US Dollar strength, and FII outflows weigh on sentiment. However, RBI’s intervention and improvements in domestic fundamentals might provide some stability in the near term.
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