Amidst Concerns of Inflation, the Indian Rupee Weakens; RBI Boosts Gold Reserves

In the country, a depreciation in the Indian Rupee has been observed due to the rising demand for the American Dollar, while the Finance Ministry has issued a warning about potential currency fluctuations. Despite these concerns, it is hoped that lower oil prices and stable core inflation will assist in mitigating these risks. The Reserve Bank of India (RBI) is closely monitoring external financial factors that could impact the value of the rupee and the country’s payment balance.

In response to global trends among central banks, the RBI has expanded its gold reserves by 337 tons in Q3. This move is part of a strategy to strengthen financial security amidst fluctuations in the international market.

The economic outlook for India remains positive with an estimated GDP growth of 6.5% for the financial year 2023-24. The robust performance in the third quarter, driven by festive season demand, contributes to this optimism.

From a technical standpoint, the USD-INR currency pair, staying above its 100-day exponential moving average (EMA), appears poised for an uptrend. Resistance has been identified at the upper trading range of 83.35, while support hovers around the September low of 82.80.

In today’s comparison with other major currencies, the US Dollar has shown its strongest performance against the New Zealand Dollar.

Incorporating economic indicators, the Chicago Fed National Activity Index signaled an economic downturn with a decrease of -0.49 in October. Similarly, a 4.1% month-on-month decline in current home sales in the United States suggests a contraction in the housing market.

The RBI’s interest rate decisions hold significant importance as they aim to control the pressure of currency fluctuations while maintaining currency stability for economic development and inflation management in India.

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