December 18, 2024
New Delhi, India
USDINR Analysis
Rupee (INR) traded flat on Wednesday in the Asian session, maintaining a defensive stance after hitting a record low of 84.92 in the previous session. Foreign fund outflows and a widening merchandise trade deficit in November added pressure on the domestic currency.
Key Highlights
- Trade Deficit Widens: India’s trade deficit reached a record $37.8 billion in November, up from $27.1 billion in October. This was driven by a 4.9% YoY decline in exports to $32.1 billion and a 27% YoY rise in imports to $69.95 billion.
- Market Sentiment: The rupee faced headwinds from muted domestic equity trends and weak Asian cues. However, the Reserve Bank of India’s (RBI) forex interventions, including USD sales via state-owned banks, helped prevent significant depreciation.
Global Factors
- US Retail and Industrial Data: Robust U.S. retail sales growth (+0.7% MoM in November) contrasted with a marginal dip in industrial production (-0.1% MoM), showcasing mixed economic signals.
- Fed Rate Decision: The Federal Reserve is widely expected to announce a 25-basis-point rate cut at its December meeting. Markets are pricing in a 97.1% probability of the cut, with keen attention on Fed Chair Jerome Powell’s press conference and economic projections.
Outlook
Hawkish commentary from the Fed or stronger-than-expected U.S. economic indicators could boost the Greenback and exert further pressure on the rupee. Meanwhile, the record trade deficit underscores the need for India to address external imbalances amid global uncertainties.
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