Highlights;
- The Indian Rupee (INR) remains stable around 87.80 against the USD, supported by a weaker US Dollar, but faces pressure from US tariffs on Indian goods that diminish their global competitiveness.
- Foreign Institutional Investors (FIIs) have sold Rs. 34,733.75 crores in Indian equities in August, leading to a 4% decline in the Nifty50 index from its June highs.
- The Federal Reserve’s John Williams hinted at potential interest rate cuts, with an 87% chance of a September cut, influencing the USD’s outlook and INR’s trajectory.
- The upcoming US Personal Consumption Expenditures (PCE) inflation data is critical, as it may impact the Fed’s monetary policy decisions and the USD’s strength.
Indian Rupee Trades Flat at 87.80
- The Indian Rupee (INR) has stabilized around 87.80 against the US Dollar (USD), as a weaker USD offsets the impact of US tariffs on India.
- Foreign Institutional Investors (FIIs) have sold Indian equities worth Rs. 34,733.75 crores in August.
- Federal Reserve Bank of New York President John Williams has hinted at potential interest rate cuts, keeping the door open for future reductions.
Indian Rupee Outlook Under Pressure
The Indian Rupee is trading flat at 87.80 against the US Dollar in early trade on Thursday, following a holiday on Wednesday for Ganesh Chaturthi. The USD/INR pair is supported by a weaker US Dollar. However, the Rupee’s outlook remains under strain following the implementation of new US tariffs on Indian imports.
From Wednesday, the US has imposed a 50% additional duty on goods from India, making Indian products less competitive in the global market and forcing exporters to lower prices.
Foreign Investors Reduce Exposure to Indian Markets
Foreign investors have consistently reduced their stakes in Indian stock markets amid ongoing trade tensions. On Tuesday, FIIs sold equity shares worth Rs. 6,516.49 crores. So far in August, FIIs have sold Rs. 34,733.75 crores, leading to a significant decline in benchmark indices. The Nifty50 is down over 4% from its June highs of 25,670.
Meanwhile, industrial output for July exceeded expectations, growing at 3.5% compared to the estimated 2.1%. Manufacturing output also saw a strong increase, rising 5.4% compared to the previous 3.9%.
Daily Digest: Key Market Movers
Market Awaits US PCE Inflation Data
- The US Dollar is facing slight selling pressure after New York Fed President John Williams hinted at a potential interest rate cut.
- The US Dollar Index (DXY) has dropped to near 97.90.
- Williams emphasized the need to move interest rates closer to “neutral” but did not confirm a cut in the September policy meeting. However, he left the door open, stating that officials will await upcoming data before making a decision.
- According to the CME FedWatch tool, there is an 87% likelihood of a rate cut in September.
- Investors are looking ahead to the US Personal Consumption Expenditure (PCE) inflation data for July, scheduled for release on Friday. Economists predict a rise in core PCE inflation to 2.9% year-over-year.
US Dollar Outlook Uncertain
- President Trump’s actions, including the termination of Fed Governor Lisa Cook, have raised concerns about the Federal Reserve’s independence. This has sparked doubts about the US Dollar’s safe-haven appeal.
- Analysts warn that continued political interference could lead to a weaker US Dollar and a steeper yield curve.
Currency Performance Table
| Currency | USD | EUR | GBP | JPY | CAD | AUD | INR | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | – | -0.12% | -0.10% | -0.24% | -0.14% | -0.29% | -0.04% | -0.30% |
| EUR | +0.12% | – | +0.06% | -0.10% | +0.00% | -0.15% | +0.14% | -0.16% |
| GBP | +0.10% | -0.06% | – | -0.18% | -0.06% | -0.21% | +0.06% | -0.20% |
| JPY | +0.24% | +0.10% | +0.18% | – | +0.13% | -0.10% | +0.16% | -0.04% |
| CAD | +0.14% | -0.00% | +0.06% | -0.13% | – | -0.15% | +0.13% | -0.06% |
| AUD | +0.29% | +0.15% | +0.21% | +0.10% | +0.15% | – | +0.23% | -0.00% |
| INR | +0.04% | -0.14% | -0.06% | -0.16% | -0.13% | -0.23% | – | -0.20% |
| CHF | +0.30% | +0.16% | +0.20% | +0.04% | +0.06% | -0.00% | +0.20% | – |
The Indian Rupee was the strongest against the US Dollar.
Technical Analysis: USD/INR
The USD/INR pair is consolidating around 87.80. The near-term trend remains bullish as the pair holds above the 20-day Exponential Moving Average (EMA) of 87.44. The 14-day Relative Strength Index (RSI) has risen above 60.00, indicating potential bullish momentum.
- Support: The July 28 low of 86.55 is a key support level.
- Resistance: The August 5 high of 88.25 is a critical hurdle.
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