The Indian Rupee weakened sharply against the US Dollar at the start of the week, slipping to a fresh record low close to the 90.00 mark. The USD/INR pair surged despite a strong showing in India’s third-quarter economic growth, as relentless foreign capital outflows continued to pressure the domestic currency.
Foreign Institutional Investors (FIIs) have remained persistent sellers in Indian equities for the last five consecutive months starting July, pulling out nearly ₹1.5 lakh crore from the market. This sustained exodus of overseas funds has significantly dented investor confidence in emerging market currencies, including the Rupee.
Even though India’s economy surprised on the upside, expanding at an annual rate of 8.2% in Q3, higher than both estimates and the previous quarter, the data failed to lift the Rupee. Economists attribute this strong growth to improved consumption following the government’s tax relief measures, which boosted purchasing power during the festive period.
However, opinions remain divided on whether the Reserve Bank of India will respond with a rate cut in its upcoming policy review. While most market participants expect a 25-basis-point reduction, analysts at Citi believe the central bank may prefer to keep rates unchanged amid inflation and financial stability concerns.
US Dollar Holds Firm on Fed Rate-Cut Expectations
The Indian currency stayed under pressure even as the US Dollar traded cautiously. Investors are largely convinced that the Federal Reserve will reduce interest rates in December. According to the CME FedWatch Tool, there is over an 87% probability of a 25-basis-point cut.
Statements from John Williams, President of the New York Federal Reserve, further strengthened dovish expectations, as he emphasized growing labor market risks and the possibility of additional near-term policy easing.
Meanwhile, speculation that Kevin Hassett could be appointed as the next Fed Chairman has added uncertainty to the outlook for the Greenback. Market strategists warn that such a move could raise concerns over the central bank’s independence, potentially reshaping US bond yields and currency trends.
The US Dollar Index (DXY) hovered near a two-week low around 99.40, indicating cautious sentiment ahead of key data releases.
Focus on US Manufacturing Data
Market participants are now closely tracking the upcoming US ISM Manufacturing PMI for November. Forecasts suggest the index could weaken further to 48.6 from October’s 48.7, signaling continued contraction in factory activity. The data could influence near-term Dollar movement and emerging market currencies.
Technical Outlook on USD/INR
From a technical perspective, the USD/INR pair has entered strong bullish terrain after posting a fresh lifetime high near 90.00. The 20-day Exponential Moving Average continues to slope upward around 89.08, acting as dynamic support for the pair.
The Relative Strength Index (RSI) remains close to 70, indicating strong momentum but also hinting at near-term overbought conditions. A clear break above the psychological 90.00 level could open the path toward 91.00. On the downside, any corrective pullback is likely to find support near the 89.14 zone.
