- Indian Rupee trades on a softer note on US Dollar demand.
- The higher-for-longer interest rate narrative in the US might lift the USD and cap upside in the INR.
- The US GDP growth number for Q4 will be due on Wednesday.
Indian Rupee (INR) edges lower on Monday amid US Dollar (USD) demand from oil companies and other importers. The hawkish comments from Fed officials about keeping the policy rate higher for longer might cap any substantial upside in the INR. However, the potential intervention from the Reserve Bank of India (RBI) might curb excess volatility in the INR.
According to the minutes of the RBI’s latest policy meeting, the MPC agreed that the Indian economy is currently showing resilience on the growth front. However, the uncertainty, food inflation volatility, and geopolitical spillovers could cap the upside of the INR.
Investors await the US Gross Domestic Product Annualized for the fourth quarter (Q4) on Wednesday and the Core Personal Consumption Expenditures Price Index (Core PCE) on Thursday. On the Indian docket, the GDP annual growth numbers and Federal Fiscal Deficit will be released on Thursday. The Indian S&P Global Manufacturing PMI for February will be published on Friday.
Daily Digest Market Movers: Indian Rupee remains sensitive to inflation and geopolitical risks
- India’s foreign exchange reserves fell for the second week in a row, reaching a two-month low of $616.10 billion on February 16, according to the Reserve Bank of India.
- The RBI revised its growth forecast for the Indian economy to 7% for the current fiscal year, an increase from its earlier forecast of 6.5%.
- The RBI’s Monetary Policy Committee agrees on the need for caution amid uncertainties, while being optimistic about growth.
- The Indian economy, which grew at a four-month high in January, expanded further in February, with accelerations in both the manufacturing and services sectors.
- Fed Governor Christopher Waller said the Fed should delay interest rate cuts by at least a few more months to see more evidence of inflation data.
Technical Analysis: Indian Rupee remains capped within the 82.70–83.20 range in the longer-term
Indian Rupee trades in negative territory on the day. USD/INR remains stuck within a multi-month-old descending trend channel of 82.70–83.20 since December 8, 2023.
The USD/INR bearish short-term outlook remains unchanged as the pair trades below the crucial 100-day Exponential Moving Average (EMA) on the daily chart. Furthermore, the 14-day Relative Strength Index (RSI) is below the 50.0 midline, suggesting the path of least resistance level is to the downside.
The first support level of the pair will emerge at the lower limit of the descending trend channel at 82.70. A decisive break below the mentioned level could see a drop to the next downside target at a low of August 23 at 82.45 and a low of June 1 at 82.25.
On the flip side, the immediate resistance level is seen at the psychological round mark and the 100-day EMA at 83.00. Any follow-through buying will send USD/INR on track towards testing the upper boundary of the descending trend channel at 83.20, en route to a high of January 2 at 83.35, and finally a round figure at 84.00.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.10% | 0.07% | 0.21% | -0.03% | 0.29% | 0.10% | |
| EUR | -0.03% | 0.06% | 0.03% | 0.18% | -0.06% | 0.26% | 0.06% | |
| GBP | -0.09% | -0.06% | -0.03% | 0.12% | -0.12% | 0.20% | 0.01% | |
| CAD | -0.06% | -0.04% | 0.02% | 0.16% | -0.10% | 0.25% | 0.03% | |
| AUD | -0.23% | -0.18% | -0.12% | -0.15% | -0.24% | 0.08% | -0.12% | |
| JPY | 0.04% | 0.06% | 0.17% | 0.09% | 0.22% | 0.35% | 0.12% | |
| NZD | -0.31% | -0.28% | -0.21% | -0.24% | -0.09% | -0.33% | -0.22% | |
| CHF | -0.10% | -0.06% | 0.00% | -0.03% | 0.13% | -0.13% | 0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain 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 so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
Source: https://www.fxstreet.com/news/usd-inr-gathers-strength-amid-us-dollar-demand-202402260233