November 20, 2024
New Delhi, India
USDINR Today
Rupee (INR) faced renewed selling pressure on Wednesday amid increased USD demand from importers and rising geopolitical risks following Russia’s report of Ukraine’s use of US ATACMS missiles. Russian President Vladimir Putin’s approval of an updated nuclear doctrine further heightened tensions.
Additionally, portfolio outflows continued to weigh on the Rupee, while the Reserve Bank of India (RBI) is likely to intervene to support the INR by selling USD.
Geopolitical and Economic Influences
- Geopolitical Tensions:
- Russian officials highlighted Ukraine’s missile strike using US-provided weapons, escalating geopolitical concerns.
- Markets remain cautious as such developments typically strengthen safe-haven demand for the USD.
- USD Demand and Fed Speeches:
- Importer demand for the dollar continues to pressure the INR.
- Investors are focused on speeches from Fed officials Lisa Cook and Michelle Bowman, which may provide insights into future monetary policy.
- India’s Foreign Portfolio Inflows:
- Despite the current sell-off, Bank of Baroda projects Foreign Portfolio Investment (FPI) inflows into India at USD 20-25 billion for FY25, which could stabilize the Rupee in the medium term.
- US Economic Indicators:
- Recent data indicates a decline in US Building Permits (-0.6%) and Housing Starts (-3.1%) for October.
- Kansas City Fed President Jeffrey Schmid signaled uncertainty over how much interest rates could fall, with inflation on track to meet its 2% target.
Market Expectations
- Nitin Agarwal, ANZ India, noted that even with a mild weakening in the USD, the RBI might use the opportunity to replenish forex reserves, limiting significant INR appreciation.
- CME FedWatch Tool indicates reduced market expectations for a December rate cut, reflecting caution amidst mixed US data.
Rupee remains under pressure due to external factors like geopolitical risks and robust USD demand. However, sustained RBI interventions are expected to cap further losses. Market participants await key Fed remarks to gauge the broader impact on USDINR movements.
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