- The Indian rupee maintains a positive position amid a softer US dollar.
- Sustained dollar demand from state-owned and foreign banks, overseas outflows and higher oil prices could limit INR growth.
- The minutes of the FOMC meeting will be in focus on Tuesday.
The Indian Rupee (INR) on Tuesday regained some of the ground lost to the decline in the US Dollar index to the lowest level since the end of August. On Monday, the Indian rupee ended lower, matching its record closing low of 83.34, as a drop in the US dollar (USD) offset the impact of higher crude oil. oil prices. According to S&P Global Ratings, the Indian economy would be somewhat less affected by global uncertainties due to the country’s domestic orientation.
However, renewed demand for dollars from state-owned and foreign banks and outflow of foreign funds may put some selling pressure on the INR in the near term. Market players will be watching the minutes of the Federal Open Market Committee (FOMC) meeting on Tuesday, which could offer guidance on the future direction of interest rates and an improvement in inflation amid a quiet day. economic data edition.
Daily Digest Market Movers: Indian rupee remains under pressure amid mixed global cues
- India will have a $7 trillion economy by 2030 if the current growth trajectory is maintained, Chief Economic Adviser (CEA) V. Anantha Nageswaran said on Saturday.
- Indian investor sentiment has been weighed down by rising oil prices, outflow of foreign funds and weakness in domestic stocks.
- According to a report in the Reserve Bank of India’s (RBI) monthly bulletin, the pace of change in India’s GDP is estimated to be higher in October-December due to “buoyant” festive demand.
- According to the RBI, the Indian economy is expected to grow at an annual rate of 6.5% between 2023 and 2024. The International Monetary Fund (IMF) estimates growth of 6.3% each year until 2028.
- The RBI is expected to keep the key interest rate on hold during its upcoming monetary policy meeting scheduled for December 6-8.
- India’s Consumer Price Index (CPI) rose 4.87% year-on-year in October from 5.02% earlier, above the market consensus of 4.80%.
- The US leading indicator fell 0.8% month-on-month in October from the previous reading of 0.7% month-on-month, the Conference Board reported on Monday.
- Investors expect the US central bank (Fed) to start cutting rates around mid-2024.
- Money market futures are pricing in a 50% chance of a rate cut of at least 25 basis points (bps) by May 2024, according to CME’s FedWatch tool.
Technical Analysis: Indian Rupee Maintains Positive Outlook
The Indian rupee is trading firmer during the day. The USD/INR pair has been trading in a range of 82.80-83.35 since September. Technically, USD/INR remains bullish as the pair is holding above the key 100-day exponential moving average (EMA) on a daily basis. diagram. This view it is supported by the 14-day Relative Strength Index (RSI), which is holding above the midline of 50.0.
The upper boundary of the trading range at 83.35 acts as an immediate resistance level for the pair. Any subsequent buy above 83.35 will pave the way for a yearly high (YTD) of 83.47. Another upside target is seen at the psychological round number of 84.00.
On the other hand, the initial level of support for USD/INR is near the confluence of the bottom of the trading range and the September 12 low at 82.80. A decisive break below will see a drop to the August 11 low at 82.60, en route to the August 24 low at 82.37.
Price in USD for the last 7 days
The table below shows the percentage change of the US Dollar (USD) against the listed major currencies over the past 7 days. The US dollar was strongest against the Canadian dollar.
| American dollar | euros | GBP | CAD | AUD | JPY | NZD | CHF | |
| American dollar | -2.42% | -2.09% | -0.67% | -3.15% | -2.67% | -3.11% | -2.04% | |
| euros | 2.37% | 0.33% | 1.70% | -0.70% | -0.24% | -0.71% | 0.38% | |
| GBP | 2.05% | -0.33% | 1.38% | -1.00% | -0.56% | -1.04% | 0.06% | |
| CAD | 0.66% | -1.74% | -1.41% | -2.46% | -2.00% | -2.47% | -1.34% | |
| AUD | 3.04% | 0.68% | 1.01% | 2.38% | 0.44% | -0.03% | 1.06% | |
| JPY | 2.60% | 0.23% | 0.55% | 1.95% | -0.46% | -0.47% | 0.61% | |
| NZD | 3.06% | 0.71% | 1.04% | 2.42% | 0.01% | 0.50% | 1.09% | |
| CHF | 1.99% | -0.39% | -0.06% | 1.33% | -1.09% | -0.62% | -1.11% |
The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).
Frequently asked questions about Indian Rupees
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of crude oil (the country is heavily dependent on imported oil), the value of the US dollar – most trade is done in USD – and the level of foreign investment all have an impact. Direct interventions by the Reserve Bank of India (RBI) in the foreign exchange markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are other major factors affecting the rupee.
The Reserve Bank of India (RBI) actively intervenes in the foreign exchange markets to maintain a stable exchange rate to help facilitate trade. In addition, the RBI is trying to keep the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the rupee. This is due to the role of the “carry trade”, in which investors borrow in countries with lower interest rates to put their money in countries that offer relatively higher interest rates and profit from the difference.
Macroeconomic factors that affect the value of the rupee include inflation, interest rates, economic growth rate (GDP), trade balance and foreign investment inflows. A higher growth rate may lead to more foreign investment, which will increase demand for the rupee. A less negative trade balance will ultimately lead to a stronger rupee. Higher interest rates, especially real rates (interest rates less inflation), are also positive for the rupee. The risk-on environment may lead to greater inflows of foreign direct and indirect investment (FDI and FII), benefiting the rupee as well.
Higher inflation, especially if it is comparatively higher than its Indian counterparts, is generally negative for the currency as it reflects devaluation due to excess supply. Inflation also increases the cost of exports, resulting in more rupees being sold to buy foreign imports, which is a negative rupee. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates, which can be positive for the rupee due to increased demand from international investors. Lower inflation has the opposite effect.
