USD/INR gains traction despite thin trading

• Indian Rupee trades on a softer note amid the light trading volume.
• Fitch Ratings predicts India's robust economic growth will boost corporate demand, offsetting global market challenges.
• Fitch Ratings anticipated India’s GDP growth of 6.5% during fiscal 2024–25.

Indian Rupee (INR) edges lower on Wednesday amid the holiday season's thin trading. In its latest research report on ’India Corporates: Sector Trends 2024’, Fitch Ratings forecasted that India’s resilient economic growth will boost the performance of the corporate sector and offset weaknesses from global market challenges. Furthermore, the leading credit rating agency stated that India is expected to be the world’s fastest-growing country, with resilient GDP growth of 6.5% during the fiscal 2024-25.

Despite robust macroeconomic dynamics, investors will monitor the developments surrounding food inflation and how the impending general elections in 2024 will eventually play out in shaping future economic policies. Later this week, the risk sentiment is expected to continue influencing currency movements amid the quiet session in the last week of 2023.

Daily Digest Market Movers: Indian Rupee remains strong despite global risks and uncertainties

• India's current account deficit narrowed to $8.3 billion in the second quarter of 2023-24, according to the Reserve Bank of India (RBI).
• The market capitalization of India's stock markets has surpassed $4 trillion, with the benchmark Nifty50 returning 17% this year.
• India's total trade in GDP has expanded from around 15% in the early 1990s to nearly 50% in 2022.
• India's foreign currency reserves were at $606.9 billion on December 8, 2023, ranking fourth among major foreign exchange reserve-holding countries, and climbed by $28.4 billion between 2023 and 2024.
• The US Dallas Fed Manufacturing Business Index for December dropped 9.3 versus -19.9 prior. November's Chicago Fed National Activity Index arrived at 0.03 from the previous reading of a 0.49 drop.
• November’s Core Personal Consumption Expenditures Price Index (Core PCE) rose 0.1% MoM and grew 3.2% YoY. Meanwhile, the headline PCE came in at -0.1% MoM and 2.6%. YoY.

Technical Analysis: Indian Rupee clings to the longer-term range theme

Indian Rupee trades weaker on the day. The USD/INR pair remains stuck within a familiar multi-month-old trading band of 82.80–83.40. Technically, the path of least resistance is to the upside as the pair holds above the key 100-period Exponential Moving Average (EMA) on the daily chart. However, the shorter-term bullish outlook looks vulnerable, hinted by the 14-day Relative Strength Index (RSI) that stands below the 50.0 midpoint.

Any follow-through buying above the upper boundary of the trading range at 83.40 will pave the way to the year-to-date (YTD) high of 83.47, en route to the 84.00 psychological mark. On the other hand, the round figure at 83.00 acts as a key support level for USD/INR. The next contention level is seen near the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A decisive break below 82.80 will see a drop to a low of August 11 at 82.60.