USD/INR rebounds ahead of Indian PMI data, RBI MPC minutes

• The Indian rupee weakens, snapping a three-day winning streak in the first Asian session on Wednesday.
• Strong USD demand from importers and equity exits weighed on the INR.
• Investors will monitor HSBC India’s August PMI advanced data and RBI’s MPC minutes due on Thursday.

The Indian rupee (INR) is losing ground on Thursday, weighed down by concerns over importer demand for US dollars (USD) and foreign equity outflows. However, further decline in crude oil prices could support the INR as India is the world’s third largest oil consumer and importer. The INR’s downside could also be limited amid possible intervention from the Reserve Bank of India (RBI), which may sell the USD to stabilize the Indian rupee.

Traders will watch the first reading of August HSBC India Purchasing Managers’ Index (PMI) reports on Thursday, along with the RBI’s Monetary Policy Committee (MPC) minutes. On the US file, the preliminary US S&P Global Purchasing Managers (PMI) for August will be released later in the day. Meanwhile, rising expectations of a Federal Reserve interest rate cut in September could push the greenback lower.

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

• The Indian rupee fell 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 outflows and relentless demand for USD from importers,” said Amit Pabari, managing director at Mumbai-based FX consultancy CR Forex.
• According to the minutes of the Federal Reserve’s (Fed) July meeting released on Wednesday, the “vast majority” of participants noted that it would likely be appropriate to cut interest rates at the September meeting if the data continues to emerge as it has expected.
• Markets are fully pricing in a September rate cut, with a full percentage point 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 payrolls of -818,000 (-0.5%), the US Bureau of Labor Statistics showed on Wednesday.

Technical Analysis: USD/INR maintains its constructive bias

Indian rupee margins are lower during the day. USD/INR maintains the bullish environment in the daily time frame as the price is well supported above the key 100-day exponential moving average (EMA). The pair is back above the 11-week uptrend line, while the 14-day Relative Strength Index (RSI) is again pointing higher above the median line, indicating that there may still be room for further upside before the market meets resistance potential.

The crucial barrier for USD/INR appears near the psychological level of 84.00. Any further buying could pave the way to a record high of 84.24 en route to 84.50.

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