Home Forex USD/INR recovery loses steam, focus on US data, Das’ Davos speech

USD/INR recovery loses steam, focus on US data, Das’ Davos speech

by SuperiorInvest


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  • The Indian rupee is trading positive as the US dollar’s recovery stagnates on Thursday.
  • The RBI’s Das said inflation is moderating and nearing the central bank’s 4% target, while growth prospects remain strong.
  • Investors will be watching US data and Das’ speech at the annual World Economic Forum (WEF) in Davos.

The Indian Rupee (INR) recovered some of its lost ground on Thursday. The INR fell on Wednesday, driven by equity outflows and a stronger US dollar (USD). As said, American dollar The index (DXY) rose to a one-month high as investors bet on an aggressive rate cut after a positive US retail sales report.

Reserve Bank of India (RBI) Governor Shaktikanta Das addressed the annual World Economic Forum (WEF) in Davos, Switzerland. RBI Governor Das said inflation in India is moderating and steadily moving closer to the central bank’s 4% target, while growth prospects remain strong. He added that core inflation has started to decline gradually, which gives reassurance Monetary Policy he works The central bank remains fully committed to reducing inflation to the target value of 4%.

Later Thursday, US Housing Starts, Building Permits, Weekly Initial Claims and Philly Fed The production index will be published. In addition, RBI’s Das will discuss insights on key challenges and opportunities and his view on monetary policy at the WEF.

Daily Digest Market Movers: Indian rupee maintains strength amid geopolitical tensions

  • Ratings agency Fitch has affirmed India’s long-term standard foreign currency issuer rating (IDR) at ‘BBB-‘ with a stable outlook.
  • India’s economy is expected to grow by 7.3% in fiscal 2024, according to the first advance estimate of the National Statistics Office (NSO).
  • RBI Governor Shaktikanta Das said India presents a picture of growth and stability amid a challenging global macroeconomic environment.
  • RBI’s Das further said that the Indian economy is expected to register a growth rate of 7% in the next fiscal year and inflation is likely to come down further.
  • U.S. retail sales rose 0.6% month-on-month in December from 0.3% in November, beating estimates of 0.4%, according to the Commerce Department’s Census Bureau.
  • The retail sales watchdog rose 0.8% month-on-month in December from a previous reading of 0.5%, above market consensus.
  • Investors priced in a 57% odds for a 25 basis point (bps) interest rate cut in March, up from 70% earlier in the week, according to CME’s Fedwatch tool.
  • Federal Reserve Governor Christopher Waller said any rate cuts this year should be done “methodically and carefully”.

Technical Analysis: The Indian Rupee is holding in a range of 82.80-83.40

The Indian rupee is trading strongly on the day. The USD/INR pair was trading within a multi-month trading range between 82.80 and 83.40. The USD/INR outlook is shifting towards bullish sentiment as the pair bounces back above the key 100-period exponential moving average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) is returning above the 50.0 midpoint, suggesting that buyers could maintain control in the near term.

The upper boundary of the trading range at 83.40 acts as immediate resistance for USD/INR. Further north, another upside filter to watch is the 2023 high of 83.47, en route to the psychological round mark of 84.00. On the downside, the first level of support appears at 83.00. A break of this level will see a drop to 82.80 (bottom of trading range, low of 12 September), followed by 82.60 (low of 11 August).

Today’s price in US dollars

The table below shows today’s percentage change in the US dollar (USD) against the major currencies listed. The US dollar was strongest against the Swiss franc.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar -0.11% -0.08% -0.10% -0.24% -0.05% -0.23% -0.03%
euros 0.11% 0.01% 0.01% -0.13% 0.06% -0.12% 0.08%
GBP 0.09% -0.02% -0.01% -0.14% 0.05% -0.14% 0.07%
CAD 0.10% 0.00% 0.01% -0.13% 0.04% -0.12% 0.08%
AUD 0.23% 0.12% 0.14% 0.13% 0.18% 0.01% 0.21%
JPY 0.05% -0.05% -0.05% -0.06% -0.20% -0.18% 0.02%
NZD 0.24% 0.12% 0.14% 0.13% 0.00% 0.16% 0.20%
CHF 0.03% -0.08% -0.06% -0.07% -0.21% -0.03% -0.20%

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 eventually 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.

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