USD/INR jumps on US Dollar demand, traders brace for Indian CPI release

The Indian Rupee (INR) loses ground to near an all-time low on Thursday. A sharp decline in the Chinese Yuan and increased US Dollar (USD) from importers and foreign banks might drag the local currency lower. Furthermore, the appointment of career bureaucrat Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) prompted traders to raise their expectations on the interest rate cuts, which could exert some selling pressure on the INR. 

Nonetheless, the downside for the Indian Rupee might be limited as the RBI might step in to limit further depreciation. The Indian central bank often intervenes by selling USD to prevent steep INR weakness. 

Traders will keep an eye on the US November Producer Price Index (PPI) and weekly Initial Jobless Claims, which are due later on Thursday. On the Indian docket, the CPI inflation, Industrial Output and Manufacturing Output data will be released on Thursday.  

Indian Rupee remains weak amid multiple headwinds

• Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday, offloading shares worth Rs 1,012.24 crore, according to exchange data.  
• Indian shares held steady on Thursday as a rise in IT stocks due to the near-certainty of a US rate cut next week was offset by a retreat in almost all other sectors on caution ahead of the Indian CPI inflation data. The NSE Nifty 50 was flattish at 24,638 points as of 10:06 a.m. IST, while the BSE Sensex was little changed at 81,566.06.
• Indian Chief Economic Advisor (CEA) Anantha Nageswaran said on Thursday that the Indian economy will be able to achieve a 6.5 -7% growth rate in the FY 25
• Nageswaran highlighted that sustaining the growth rate remains a priority. 
• India’s GDP growth is estimated to rise to 7% in FY26, led by a capex cycle reboot, tailwinds from back-ended fiscal spending in FY25, a cut in the cash reserve ratio (CRR), and likely further macro-prudential easing, which could help revive credit growth, according to Axis Bank.
• Economists at Capital Economics anticipate a 25 bps cut in India’s repo rate at Malhotra’s first MPC meeting in February, if not in an unscheduled meeting earlier. Economists estimated that the cut would come in April under Das’ leadership.
• The US Consumer Price Index (CPI) inflation rose to 2.7% YoY in November from 2.6% in October, the US Bureau of Labor Statistics showed on Wednesday. This reading was in line with the market consensus. 
• The core CPI, excluding volatile food and energy prices, climbed 3.3% YoY in November, compared to 3.3% during the same period. On a monthly basis, the headline CPI increased 0.3% MoM, while the core CPI rose 0.3% MoM in November.
• Fed funds futures are pricing in a roughly 95% chance that the US central bank lowers rates in the December meeting, according to CME’s FedWatch Tool. 

USD/INR keeps the bullish vibe in the longer term

The Indian Rupee softens on the day. The USD/INR pair paints a positive picture on the daily chart as the pair is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) is located above the midline near 67.70, suggesting the support level is more likely to hold than to break. 

The potential resistance level emerges at 85.00, representing the ascending trend channel and the psychological level. Extended gains above this level could see a rally to 85.50. 

On the other hand, the lower boundary of the trend channel at 84.70 acts as an initial support level for USD/INR. Sustained trading below the mentioned level could pave the way to 84.22, the low of November 25, followed by 84.10, the 100-day EMA.