Rupee Hits Over Two-Week High on Dollar Inflows: What’s Next?
The Indian rupee strengthened to a two-week high of 84.26 on Monday, supported by dollar inflows tied to MSCI equity index rebalancing and gains in regional currencies. This marks a 0.15% rise from Friday’s close of 84.4450, when the rupee touched an all-time low of 84.5075, prompting Reserve Bank of India (RBI) intervention.
The dollar index was at 106.9 on the day, down 0.5% from its closing level on Friday, while the 10-year U.S. Treasury yield declined 6 bps to 4.35%.
Bond markets cheered the selection of fund manager Scott Bessent as U.S. Treasury secretary on Monday on expectations he could keep a leash on U.S. debt, while falling yields tugged down the dollar and the mood lifted U.S. stock futures close to record highs.
President-elect Trump’s appointment of a Treasury secretary has been closely watched in bond markets as expectations of tax cuts as well as tariffs and an immigration crackdown have stoked fears of inflation and big deficits.
Bessent told the Wall Street Journal in an interview published on Sunday that both tax and spending cuts were priorities. Bessent told CNBC earlier in November, before his selection as Treasury secretary, that he would recommend “tariffs be layered in gradually”, though his appointment gave only the merest and short-lived boost to China’s yuan.
The pullback was spurred by markets taking comfort in U.S. President-elect Donald Trump’s decision to nominate veteran investor Scott Bessent as the Treasury Secretary.
Indian equities are poised for passive inflows of $2.5 billion from the MSCI rejig, effective after Monday’s market close. Meanwhile, the rupee faced consistent pressure over the past two months, relying on frequent RBI interventions that have drawn India’s forex reserves to a four-month low of $657.89 billion as of Nov. 15.
Looking ahead, traders are eyeing U.S. FOMC meeting minutes and PCE inflation data later this week for further direction on USDINR movement.
Technical Outlook – U.S. Dollar/ Indian Rupee
The USDINR pair retreated from its 84.52 high, trading at 84.25, its lowest level in two weeks.
Since Friday, the pair has been trending lower, forming similar top candlesticks, signaling a potential further decline. Additionally, the RSI (14) and its 9-SMA are showing a bearish crossover, supporting the downside outlook.
A break below 84.25 could lead to a test of 84.15-83.98 in the near term. Conversely, any rise toward 84.35-84.43 is likely to attract selling pressure.
Until then, Happy Trading!
Commodity Samachar Securities
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