- The Indian rupee is gaining some ground thanks to a softer US dollar and lower US bond yields.
- The Reserve Bank of India (RBI) MPC decided to keep key rates unchanged at 6.5% for the sixth time in a row.
- Traders will watch US weekly Initial Jobless Claims and the Fed’s Barkin speech later on Thursday.
The Indian Rupee (INR) is trading stronger on Thursday amid weaker American dollar (USD) and the decline in US bond yields. Reserve Bank of India (RBI) Governor Shaktikanta Das said the central bank’s Monetary Policy Committee (MPC) decided to maintain the status quo on the key interest rate on Thursday.
India’s central bank, the MPC, decided by a 5-to-1 majority to keep the repo rate at its current level of 6.5% for the sixth time in a row as inflation approaches the upper limit of the 6% tolerance.
India’s central bank raised its economic growth forecast to 7% from 6.5% due to encouraging signs in the Indian economy such as expanding manufacturing PMI and strong growth. However, escalating geopolitical tensions in the Middle East could pose a threat as it could disrupt shipping in the Red Sea, resulting in higher consumer prices.
American weekly Initial Unemployment claims, and wholesale inventory will be released. Federal Reserve Bank of Richmond President Thomas I. Barkin is also scheduled to speak later Thursday.
Next week, the focus will shift to India’s inflation and industrial production data. Investors will be watching developments around India’s inflation trajectory.
Daily Digest Market Movers: Indian rupee remains firm after RBI rate decision
- Reserve Bank of India (RBI) Governor Shaktikanta Das said global trade momentum remains weak and is showing signs of recovery.
- RBI’s Das further said that inflation has moderated considerably and will moderate further globally in 2024.
- Das added that India’s sovereign and central government debt is expected to moderate in the coming years, with agricultural activity holding up well, while the services sector should remain resilient.
- RBI forecasts retail inflation at 5.4% for the current fiscal and 4.5% for 2024-25.
- According to the International Energy Agency (IEA), India will account for one-third of the 3.2 million barrels per day (mb/d) of global oil demand between 2023 and 2030.
- Finance Minister Nirmala Sitharaman said on Wednesday that India’s debt-to-GDP ratio is well below that of other emerging markets.
- The finance minister added that India’s retail inflation has stabilized in the 2-6% tolerance band and core inflation has come down to 3.8% in December 2023.
- Microsoft CEO Satya Nadella said India is one of the fastest growing markets in the world and AI could power 10% of India’s $5 trillion economy by 2025.
- Attacks by Iranian-backed Houthi rebels on shipping in the Red Sea have disrupted traffic through the Suez Canal, which carries about 12% of global trade.
- Federal Reserve Governor Adriana Kugler said inflation is showing solid signs of slowing, but she is not yet ready to start cutting interest rates.
- Minneapolis Fed President Kashkari said the Fed needs more time to gain confidence in the inflation trajectory before cutting rates. He suggested that two to three rate cuts for 2024 would seem appropriate based on current data.
Technical Analysis: The Indian Rupee is extending the long-term range theme
The Indian rupee remains in positive territory on the day. The USD/INR the pair is trading within a two-month-old descending trend channel of 82.70-83.20.
Technically, USD/INR keeps the bearish outlook intact in the near-term as the pair remains bounded below the key 100-period exponential moving average (EMA) on a daily basis. diagram. The bearish momentum is sponsored by the 14-day Relative Strength Index (RSI) which is below the mid-line of 50.0, suggesting that the possibility of the USD extending its decline against the INR cannot be ruled out.
If the bears retreat, the February 2 low at 82.83 acts as an initial support level for USD/INR. Another downside filter to watch is the lower boundary of the downtrend channel at 82.70. Any subsequent selling below that level will see a drop to the August 23 low of 82.45 and on its way to the June 1 low of 82.25.
If USD/INR sees sustained bullish pressure above the 83.00 psychological barrier, the confluence of the upper boundary of the downtrend channel and the January 18 high at 83.20 could be a good target for upside. A break above 83.20 could pave the way for the January 2 high at 83.35, en route to the psychological level of 84.00.
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 weakest against the New Zealand dollar.
| American dollar | euros | GBP | CAD | AUD | JPY | NZD | CHF | |
| American dollar | 0.19% | 0.37% | 0.14% | 0.61% | 1.06% | 0.02% | 1.23% | |
| euros | -0.19% | 0.17% | -0.08% | 0.43% | 0.91% | -0.17% | 1.05% | |
| GBP | -0.36% | -0.17% | -0.25% | 0.26% | 0.74% | -0.35% | 0.87% | |
| CAD | -0.14% | 0.08% | 0.25% | 0.51% | 0.98% | -0.09% | 1.13% | |
| AUD | -0.62% | -0.44% | -0.27% | -0.52% | 0.46% | -0.61% | 0.63% | |
| JPY | -1.08% | -0.91% | -0.76% | -1.02% | -0.48% | -1.10% | 0.13% | |
| NZD | -0.03% | 0.20% | 0.36% | 0.12% | 0.60% | 1.04% | 1.21% | |
| CHF | -1.26% | -1.05% | -0.87% | -1.10% | -0.62% | -0.18% | -1.23% |
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).
RBI FAQs
The role of the Reserve Bank of India (RBI), in its own words, is “…to maintain price stability while keeping in mind the objective of growth”. This includes keeping the inflation rate at a stable 4% level primarily through the interest rate tool. The RBI also maintains the exchange rate at a level that does not cause excessive volatility and problems for exporters and importers as the Indian economy is heavily dependent on foreign trade, especially oil.
The RBI formally meets in six meetings every two months to discuss its monetary policy and adjust interest rates if necessary. When inflation is too high (above its 4% target), the RBI usually raises interest rates to discourage borrowing and spending, which can support the rupee (INR). If inflation falls too far below target, the RBI could cut rates to encourage more lending, which could be negative for the INR.
Given the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in the foreign exchange markets to keep the exchange rate within a limited range. It does this so that Indian importers and exporters are not exposed to unnecessary currency risk during periods of exchange rate volatility. The RBI buys and sells rupees in the spot market at key levels and uses derivatives to hedge its positions.
