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- USD/INR holds positive ground ahead of RBI rate decision, US NFP data
USD/INR holds positive ground ahead of RBI rate decision, US NFP data
- Indian Rupee edges lower amid the cautious mood.
- The Reserve Bank of India (RBI) is expected to maintain the status quo on the benchmark policy rate.
- RBI interest rate decision and the US Nonfarm Payrolls (NFP) report will be the highlights on Friday.
Indian Rupee (INR) trades on a softer note on Friday as investors turn cautious. Nonetheless, the decline in crude oil prices and foreign inflows might limit the INR’s downside. The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting began on Wednesday, and RBI Governor Shaktikanta Das will unveil the fifth monetary policy of the financial year 2023–24 on Friday. The central bank is projected to retain its hawkish policy stance and maintain the benchmark policy rate unchanged at 6.50% amid strong macroeconomic fundamentals and resilient domestic markets.
Investors await the RBI interest rate decision on Friday. The attention will shift to the US employment data, including Nonfarm Payrolls (NFP) and the Unemployment Rate. Meanwhile, US Dollar demand and risk aversion in global markets might lift the USD/INR pair in the near term.
Daily Digest Market Movers: Indian Rupee weakens amid the multiple headwinds and uncertainties
- The Nifty 50 has risen 5.77% in the previous seven sessions and reached record-high levels, with equity inflows of more than $3 billion in December.
- According to S&P Global Ratings' latest report, India is set to be the world's third-biggest economy by 2030.
- India maintained its position as the world's fastest-growing major economy, surpassing forecasts with a GDP increase of 7.6% in the September quarter.
- RBI has kept the benchmark policy rate unchanged over the last four monetary meetings. The last adjustment occurred in February 2023, with a 6.5% rate rise.
- US Initial Jobless Claims rose 220K in the week ending December 2 versus 218K prior. Continuing Claims eased to 1.861M from the previous week of 1.925M.
Technical Analysis: Indian Rupee’s outlook remains constructive
Indian Rupee trades softer on the day. The USD/INR pair has remained confined in a trading range of 82.80–83.40 since September. Technically, USD/INR holds above the key 100-day Exponential Moving Average (EMA) with an upward slope on the daily chart, indicating the bullish outlook remains intact. The upward momentum is bolstered by the 14-day Relative Strength Index (RSI), which remains above the 50.0 midpoint.
The immediate resistance level will emerge at the upper boundary of the trading range of 83.40. Further north, the next hurdle is seen at the year-to-date (YTD) high of 83.47, en route to a round figure of 84.00.
On the flip side, the key contention level is located at the 83.00 psychological round figure. A breach of this level will lead to the confluence of the lower limit of the trading range and a low of September 12 at 82.80. Further south, the next downside target to watch is a low of August 11 at 82.60.
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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | -0.02% | -0.16% | -0.19% | -0.46% | -0.06% | -0.05% | |
| EUR | 0.00% | -0.02% | -0.17% | -0.20% | -0.48% | -0.07% | -0.04% | |
| GBP | 0.03% | 0.02% | -0.15% | -0.18% | -0.45% | -0.06% | -0.02% | |
| CAD | 0.16% | 0.16% | 0.15% | -0.03% | -0.30% | 0.10% | 0.11% | |
| AUD | 0.19% | 0.20% | 0.18% | 0.03% | -0.28% | 0.13% | 0.16% | |
| JPY | 0.50% | 0.48% | 0.49% | 0.31% | 0.30% | 0.46% | 0.43% | |
| NZD | 0.06% | 0.07% | 0.04% | -0.10% | -0.13% | -0.40% | 0.04% | |
| CHF | 0.06% | 0.04% | 0.02% | -0.13% | -0.16% | -0.43% | -0.04% |
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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