USD/INR rebounds ahead of Indian PMI data, RBI’s MPC Minutes

• The Indian Rupee weakens, snapping the three-day winning streak in Wednesday’s early Asian session.
• Strong USD demand from importers and outflows from equities have weighed on the INR. 
• Investors will monitor the advanced Indian August HSBC PMI data and the RBI’s MPC Minutes, which are due on Thursday. 

The Indian Rupee (INR) loses ground on Thursday, pressured by concerns about importers' US Dollar (USD) demand and foreign equity outflows. Nonetheless, the further decline of crude oil prices might underpin the INR as India is the world’s third-largest oil consumer and importer. The downside of the INR might also be limited amid the likely intervention from the Reserve Bank of India (RBI), which might sell USD to stabilize the Indian Rupee. 

Traders will keep an eye on the first reading of the Indian August HSBC Purchasing Managers Index (PMI) reports on Thursday, along with the RBI Monetary Policy Committee (MPC) Minutes. On the US docket, the preliminary US S&P Global Purchasing Managers Index (PMI) for August is due later in the day. Meanwhile, rising expectations of a Federal Reserve interest rate cut in September could drag the Greenback lower. 

Daily Digest Market Movers: Indian Rupee remains vulnerable amid multiple challenges

• The Indian Rupee is down 0.2% against the US Dollar in August, making it the worst-performing Asian currency. 
• The INR “faces persistent challenges — a widening trade deficit, ongoing foreign outflows, and relentless demand for USD from importers,” said Amit Pabari, managing director at FX advisory firm CR Forex in Mumbai. 
• According to the minutes of the Federal Reserve’s (Fed) July meeting released Wednesday, “the vast majority” of participants observed that it would likely be appropriate to cut the interest rate in the September meeting if the data continued to come in about as expected.
• Markets are fully pricing in a September cut, with a full percentage point worth of rate cuts anticipated by the end of this year.
• The preliminary estimate of the benchmark revision indicated an adjustment to March 2024 total Nonfarm employment of -818,000 (-0.5%), the US Bureau of Labor Statistics showed on Wednesday.

Technical Analysis: USD/INR maintains its constructive bias

Indian Rupee edges lower on the day. The USD/INR keeps the bullish environment on the daily timeframe as the price is well-supported above the key 100-day Exponential Moving Average (EMA). The pair bounces back above the 11-week-old uptrend line, while the 14-day Relative Strength Index (RSI) points higher above the midline again, indicating there could still be room for further upward movement before the market potentially encounters resistance.

The crucial upside barrier for USD/INR emerges near the 84.00 psychological mark. Any follow-through buying could pave the way to the record high of 84.24 en route to 84.50. 

On the downside, the low of August 20 at 83.77 acts as an initial support level for the pair. Extended losses will see a drop to the 100-day EMA at 83.56, followed by 83.36, the low of June 28.