January 20, 2025
New Delhi, India
USDINR
The Indian Rupee (INR) strengthened on Monday following its worst weekly performance in 18 months. Support came from the Reserve Bank of India’s (RBI) routine interventions and declining crude oil prices, which helped curb excessive losses.
However, persistent foreign portfolio outflows and strong US Dollar (USD) bids in the non-deliverable forwards (NDF) market remain potential downside risks for the INR.
Key Developments:
- RBI Interventions & Forex Reserves:
- India’s foreign exchange reserves fell for the sixth consecutive week, hitting a 10-month low of $625.9 billion as of January 10 (RBI data).
- Analysts highlight the RBI’s cautious deployment of reserves to manage currency volatility amid global uncertainties.
- Oil Prices Impact:
- Lower crude oil prices have provided additional support for the INR, as India is a major oil-importing nation.
- Economic Growth Outlook:
- The World Bank projects India’s economy to grow at 6.7% in the next fiscal year, slightly above the current fiscal year’s 6.5% growth rate but below the previous year’s 8.2%.
Global Influences:
- US Housing Data:
- Housing Starts rose by 15.8% in December, exceeding market expectations, while Building Permits dipped slightly but remained above estimates.
- Donald Trump’s Policies:
- Investors remain cautious ahead of President-elect Donald Trump’s inauguration at 17:00 GMT. His anticipated tariff policies could weigh on emerging market currencies, including the INR.
Outlook:
The INR gains are likely to be capped by continued USD demand and foreign portfolio outflows. While RBI measures and easing oil prices offer short-term support, global policy shifts under the new US administration could pose challenges. Traders will keep a close watch on developments following Trump’s inauguration.
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