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- USD/INR remains flat ahead of Indian Trade Balance, US PMI data
USD/INR remains flat ahead of Indian Trade Balance, US PMI data
- Indian Rupee trades around a flatline despite the softer US Dollar.
- India's Wholesale Price Index (WPI) inflation emerged from the deflationary zone, rising to 0.26% in November.
- Investors await the Indian Trade Balance and the US S&P Global PMI report for fresh impetus.
Indian Rupee (INR) trades flat on Friday despite the USD weakness. The Wholesale Price Index, which measures India's wholesale inflation, has entered positive territory for the first time since March 2023, according to data from the commerce ministry on Thursday. Inflationary pressures have been attributed to price rises in a variety of industries.
The Reserve Bank of India (RBI) Governor Shaktikanta Das said that the inflation figures may show an uptick in November and December due to food output pressures. Governor Das added that, taking into account these factors and the assumption of typical monsoons, CPI-based inflation is estimated at 5.4% for 2023–24, with Q3 at 5.6% and Q4 at 5.2%.
Market players will monitor the Indian Trade Balance and the US S&P Global Purchasing Managers' Index (PMI), due later on Friday. The Manufacturing PMI is estimated to ease from 49.4 to 49.3, while the Services PMI is projected to drop from 50.8 to 50.6.
Daily Digest Market Movers: Indian Rupee remains sensitive as inflation hits eight-month high
- India’s WPI Inflation rose by 0.26% YoY in November from a previous reading of 0.52%, above the forecast of 0.08%.
- India’s Wholesale Price Food Index came in at 4.69% YoY in November whereas the WPI Fuel Price Index arrived at -4.61% YoY in the same period.
- India’s WPI Manufacturing Inflation for November declined by 0.64% YoY from a 1.13% fall in October.
- India's Consumer Price Index (CPI) climbed 5.55% YoY in November versus 4.87 %prior, worse than the expectation of 5.70%.
- The Asian Development Bank (ADB) forecasted India’s economy to expand 6.7% in Financial Year 2023–24, revised up from 6.3% in September.
- US Retail Sales came in better than the market expectation, growing 0.3% in November from a 0.2% decline in the previous reading.
- The US weekly Initial Jobless Claims arrived at 202K versus 221K prior. Continuing Claims rose by 20K to 1.876M.
- The Federal Reserve (Fed) maintained interest rates unchanged at the target range of 5.25%–5.5% in its December meeting, as widely expected.
Technical Analysis: The Indian Rupee keeps the positive stance unchanged
Indian Rupee trades on a flat note on the day. The USD/INR pair has remained stuck in a multi-month trading range of 82.80–83.40. Technically, USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. It’s worth noting that the 14-day Relative Strength Index (RSI) bounced off the 50.0 midline for the second time, indicating that bulls remain cautiously optimistic.
The first upside barrier is seen near the upper boundary of the trading range at 83.40. A break above 83.40 will see a rally to the year-to-date (YTD) high of 83.47, followed by the psychological mark of 84.00. On the downside, 83.00 will be the critical support level for USD/INR. Any follow-through selling will see a drop to 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. The next contention level will emerge near 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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | 0.06% | -0.12% | -0.14% | -0.18% | -0.01% | -0.12% | |
| EUR | 0.00% | 0.07% | -0.10% | -0.15% | -0.14% | -0.03% | -0.10% | |
| GBP | -0.06% | -0.08% | -0.17% | -0.22% | -0.21% | -0.10% | -0.16% | |
| CAD | 0.11% | 0.10% | 0.16% | -0.04% | -0.04% | 0.07% | 0.00% | |
| AUD | 0.15% | 0.14% | 0.21% | 0.04% | -0.02% | 0.11% | 0.04% | |
| JPY | 0.20% | 0.14% | 0.23% | 0.06% | 0.01% | 0.10% | 0.05% | |
| NZD | 0.05% | 0.00% | 0.06% | -0.10% | -0.13% | -0.19% | -0.06% | |
| CHF | 0.12% | 0.10% | 0.16% | 0.01% | -0.04% | -0.04% | 0.07% |
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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