USD/INR meets upward ceiling due to potential RBI interventions, eyes on 16th BRICS Summit

• The Indian Rupee receives downward pressure from sustained outflows in Indian equities.
• Indian PM Modi is set to meet Chinese President Xi Jinping on the second day of the BRICS Summit.
• The US Dollar appreciates as Treasury yields continue to rise amid increased risk aversion.

The Indian Rupee (INR) remains relatively stable against the US Dollar (USD) on Wednesday. However, traders noted that potential interventions by the Reserve Bank of India (RBI) limited the upward movement of the USD/INR pair.

The Rupee receives downward pressure from outflows, as foreign institutional investors have sold around $10 billion in Indian stocks so far this October, exceeding the previous record monthly outflow of $8.35 billion set in March 2020, according to a Reuters report.

Indian Prime Minister Narendra Modi and Russian President Vladimir Putin on Tuesday held a meeting on the sidelines of the 16th BRICS Summit in Kazan. During their discussion, Modi expressed his desire for peace in Ukraine and conveyed that New Delhi is prepared to assist in reaching a truce to resolve Europe's deadliest conflict. Modi is also scheduled to meet Chinese President Xi Jinping on Wednesday.

Daily Digest Market Movers: Indian Rupee faces challenges due to outflows from domestic equities

• The US Dollar appreciates as Treasury yields rise amid rising odds of nominal rate cuts by the Federal Reserve (Fed). Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.04% and 4.21%, respectively.
• According to the CME FedWatch Tool, there is a 91% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.
• In a speech at the New York Fed Central Banking Seminar, RBI Deputy Governor Michael Patra stated, "We believe that the best defense against global risks is to strengthen the macroeconomic fundamentals and build adequate buffers, supported by prudent macroeconomic policies." He highlighted that India’s central bank has been strategically increasing its foreign exchange reserves, which are now equivalent to or nearly equal to 12 months' worth of imports.
• In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
• Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted on Monday that the Fed is closely monitoring the US labor market for signs of rapid destabilization. Kashkari cautioned investors to anticipate a gradual pace of rate cuts over the coming quarters, suggesting that any monetary easing will likely be moderate rather than aggressive.
• The Reserve Bank of India stated in its October bulletin that aggregate demand in India is expected to rebound from the temporary slowdown observed in the second quarter, driven by a surge in festive demand and an increase in consumer confidence.

Technical Analysis: USD/INR maintains position above 84.00, nine-day EMA

The USD/INR pair continues to trade above 84.00 on Wednesday. A review of the daily chart shows that the pair is consolidating within an ascending channel pattern, indicating a bullish trend. The 14-day Relative Strength Index (RSI) is also above the 50 mark, reinforcing the current bullish momentum.

In terms of resistance, the pair may encounter a challenge at its all-time high of 84.14, achieved on August 5, followed by the upper boundary of the ascending channel near 84.20.

On the support side, immediate backing is found at the nine-day Exponential Moving Average (EMA) around the 84.02 level, which coincides with the lower boundary of the ascending channel close to the psychological level of 84.00.

USD/INR: Daily Chart