Key Moments
- USD/INR traded near 93.80 on Monday, extending its decline for an eighth straight session and hovering close to seven-month lows.
- Foreign investors have added more than $4.1 billion to Indian equities so far in November, their largest monthly net buying since September 2024.
- Market attention is shifting to upcoming US CPI and PPI data as expectations for a December Fed rate hike above 25 basis points reach over 78%.
INR Gains Momentum as Foreign Capital Flows Surge
USD/INR extended its downward trajectory for the eighth consecutive session, with the pair trading around 93.80 during early European hours on Monday. The cross remains near seven-month lows as the Indian Rupee (INR) continues to find firm backing from robust foreign capital inflows.
Overseas investors have funneled more than $4.1 billion into Indian equity markets so far in November, making it their strongest month of net purchases since September 2024. This sustained buying interest is providing a solid fundamental anchor for the Rupee.
Rotation From Global Tech to Asian Assets Benefits India
A broader pullback from global artificial intelligence-related technology stocks is prompting investors to reallocate capital toward Asian markets. As market participants reassess elevated technology valuations, India is drawing renewed attention as an equity market perceived as relatively undervalued.
This rotation is supporting demand for Indian assets and adding to the positive backdrop for the INR against the US Dollar (USD).
US Dollar Weighed by Softer Oil and Reduced Geopolitical Risk
USD/INR is also being pressured by a softer US Dollar, in part as declining crude oil prices help alleviate inflation concerns. Energy markets retreated after US President Donald Trump indicated that further military action against Iran is “highly unlikely,” provided there is continued progress on Iran’s nuclear program and the Strait of Hormuz remains open.
Trump also stated that the unpopular conflict in the Middle East, which had previously contributed to higher energy prices, was a significant factor in the Republicans’ recent midterm election defeats.
Fed Tightening Expectations Offer Support to the Greenback
Despite recent weakness, downside for the Greenback may be cushioned by stronger US labor market data that has intensified speculation about additional monetary tightening. The CME FedWatch tool shows that the probability of a 25-basis-point rate increase at the December Federal Open Market Committee (FOMC) meeting has climbed above 78%.
Hawkish sentiment toward the Federal Reserve is being reinforced by firm employment numbers. October Nonfarm Payrolls (NFP) rose by 165,000, substantially exceeding the 65,000 consensus forecast and adding to September’s revised 60,000. The Unemployment Rate slipped to 4.1%, better than the anticipated 4.2%.
| US Labor Indicators | Latest Reading | Market Expectation | Prior / Revised |
|---|---|---|---|
| Nonfarm Payrolls – October | 165,000 | 65,000 | 60,000 (September, revised) |
| Unemployment Rate | 4.1% | 4.2% | – |
| Probability of 25 bps Hike (December FOMC) | Above 78% | – | – |
Traders are now closely watching Tuesday’s Consumer Price Index (CPI) release and Friday’s Producer Price Index (PPI) data for clearer guidance on the Federal Reserve’s next policy moves.
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