USD/INR trades flat with mild gain amid inflation concerns

• Indian Rupee trades flat despite the weaker USD, lower oil prices.
• RBI’s Das said the Indian Rupee has witnessed “low volatility” and orderly movements as compared to its peers.
• Das estimates India's real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25.

Indian Rupee trades around a flatline on Thursday despite the softer US Dollar (USD) and the decline in oil prices. On Wednesday, the Reserve Bank of India (RBI) Governor Shaktikanta Das said the Indian Rupee has shown moderate volatility and orderly movements as compared to its peers despite elevated US treasury yields and a strong USD. Nonetheless, RBI will continue to closely monitor external financial factors that have potentially impacted the value of INR and the nation’s balance of payments.

Furthermore, RBI Governor Das expressed optimism about India’s economy as the country has demonstrated resilience despite a global slowdown and largely due to its reliance on domestic demand. Das estimates India's real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25 due to its robust growth rate, ranking the country among the fastest-growing large economies in the world.

Markets remain subdued on Thursday as traders prepare for the Thanksgiving Day holiday in the US. On Friday, the attention will shift to the US S&P Global PMI data. Meanwhile, the foreign fund's outflows and higher oil prices might cap the INR’s upside in the near term.

Daily Digest Market Movers: Indian Rupee remains sensitive to the higher US Treasury yield, stronger USD

• Reserve Bank of India (RBI) Governor Shaktikanta Das forecasted India's real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25.
• RBI’s Das said its monetary policy will pursue disinflation to progressively align inflation to the target while supporting growth.
• RBI’s Das further stated India is vulnerable to food-price shocks from extreme weather events and global factors despite a recent moderation in prices.
• India’s Ministry of Finance said in the report that the government and the RBI remain on high alert over inflationary risks.
• Indian central bank, which maintained the interest rate over the last four meetings, anticipates that average inflation will decline to 5.4% in 2023-24 from 6.7% in the last fiscal year.
• RBI raised its gold holdings by nine tonnes during the September 2023 quarter, bringing the total to 337 tonnes amassed by central banks worldwide.
• The US weekly Jobless Claims unexpectedly fell to 209K, the biggest fall since June. Continuing Claims dropped to 1.840M versus 1.862M prior.
• The University of Michigan Consumer Sentiment Index climbed to 61.3 in November from an initial reading of 60.4, better than the market expectation of 60.5.
• The UoM 1-year inflation expectations rose to 4.5% from the preliminary 4.4%. The 5–year inflation expectations were steady at 3.2%.
• The FOMC minutes showed all participants agreed to “proceed carefully” and policy decisions at every meeting would continue to be based on the totality of incoming information and economic outlook as well as the balance of risks.

Technical Analysis: The Indian Rupee keeps a positive outlook intact

The Indian Rupee trades flat on the day. The USD/INR pair has traded within the 82.80–83.35 range since September. The technical outlook suggests that the path of least resistance is to the upside as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) holds above the 50.0 midline, suggesting that further upside looks favorable.

The first resistance level for USD/INR will emerge at 83.35 (the upper boundary of the trading range). If the buyers reclaim the latter, further upside is seen at the year-to-date (YTD) high of 83.47. The next hurdle to watch is a psychological round figure at 84.00.

On the downside, the contention level is located at 82.80. The mentioned level is the confluence of the lower limit of the trading range and a low of September 12. A decisive break below 82.80 will pave the way to a low of August 11 at 82.60. The additional downside filter to watch is a low of August 24 at 82.37.