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- USD/INR loses traction, all eyes on the US NFP data
USD/INR loses traction, all eyes on the US NFP data
- Indian Rupee trades strongly amid the risk-on mood, lower US yields.
- India’s Chief Economic Advisor said RBI’s policy will not be influenced by Fed's tightened policy and the differential in bond yields.
- Market players will closely monitor the US Nonfarm Payrolls (NFP), due later on Friday.
Indian Rupee (INR) remains firm on Friday, backed by the risk-on mood and a fall in the US Treasury bond yields. India’s Chief Economic Advisor (CEA) V. Anantha Nageswaran said on Thursday that the Reserve Bank of India (RBI) would not be forced to tighten monetary policy even if the US Federal Reserve (Fed) raised interest rates further.
Nageswaran further stated that financial stability was considerably stronger than it was ten years ago. Furthermore, he said that the RBI's policy would be mainly determined by domestic factors and would not be impacted by the differential in bond yields.
Investors will keep an eye on the US employment data later on Friday, including US Nonfarm Payrolls (NFP), Average Hourly Earnings, and the Unemployment Rate. The highly-anticipated NFP is expected to add 180K jobs in October, while the Unemployment Rate is expected to remain steady at 3.8%. The stronger-than-expected data might cap the downside of the USD/INR pair.
Daily Digest Market Movers: Indian Rupee gains ground, USD weakens ahead of the key data
- Reserve Bank of India (RBI) Deputy Governor, M. Rajeshwar Rao, underscored the critical role of regulations in ensuring the stability and growth of the financial sector.
- India's Chief Economic Advisor (CEA), V. Anantha Nageswaran, stated that RBI would not need to raise the interest rates even if the Federal Reserve (Fed) tightens its monetary policy further.
- Traders will monitor the debt sales, as India plans to sell its longest-duration bond on Friday, which is expected to see strong demand.
- RBI announced the launch of the 'Inflation Expectations Survey of Households' and the 'Consumer Confidence Survey,' which would provide key inputs for the bi-monthly monetary policy.
- Geopolitical risks are India's biggest challenge, but RBI Governor Das believes India is better positioned than other nations to cope with any potentially risky situation.
- The Federal Open Market Committee (FOMC) maintained the interest rate unchanged at its November meeting, as widely expected.
- Markets are confident that the Fed is nearing the end of its tightening cycle.
- US weekly Initial Jobless Claims for the week ending October 27 climbed by 217K versus 212K prior, better than expected.
- US Factory Orders came in at 2.8% MoM in September, above the market consensus of 2.3%.
- The US Unit Labor Cost for the third quarter (Q3) dropped by 0.8% from the previous reading of a 2.2% rise, below the expectation.
Technical Analysis: Indian Rupee gains traction, but bearish bias stays intact
The Indian Rupee continues gaining ground on the day. The USD/INR pair trades in a familiar range of 83.00–83.35 since September. USD/INR maintains a bullish vibe despite the latest pullback as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.
The critical resistance level for the pair will emerge near the upper boundary of the trading range at 83.35. A break above 83.35 will see a rally to the year-to-date (YTD) highs of 83.45. Further north, the next upside stop to watch is a psychological round mark at 84.00.
On the other hand, the confluence of a low from October 24 and a round level marked at 83.00 acts as a key contention for the pair. Any weakness below the latter will see losses extend to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.58% | -0.50% | -0.53% | -1.54% | 0.01% | -1.13% | 0.74% | |
| EUR | 0.58% | 0.08% | 0.05% | -0.95% | 0.59% | -0.56% | 1.31% | |
| GBP | 0.51% | -0.07% | -0.02% | -1.03% | 0.52% | -0.63% | 1.23% | |
| CAD | 0.53% | -0.05% | 0.03% | -1.00% | 0.54% | -0.60% | 1.27% | |
| AUD | 1.51% | 0.94% | 1.01% | 0.99% | 1.52% | 0.40% | 2.24% | |
| JPY | -0.02% | -0.60% | -0.50% | -0.57% | -1.53% | -1.11% | 0.73% | |
| NZD | 1.14% | 0.55% | 0.66% | 0.60% | -0.39% | 1.14% | 1.88% | |
| CHF | -0.74% | -1.33% | -1.25% | -1.28% | -2.34% | -0.73% | -1.88% |
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
What are the key factors driving the Indian Rupee?
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.
How do the decisions of the Reserve Bank of India impact the Indian 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.
What macroeconomic factors influence the value of the Indian Rupee?
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.
How does inflation impact the Indian 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.
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