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- USD/INR holds positive ground, US GDP data looms
USD/INR holds positive ground, US GDP data looms
- Indian Rupee drifts lower amid the modest rebound of the USD.
- The Reserve Bank of India’s (RBI) monthly bulletin emphasized a strong warning on inflation.
- Market players will focus on the US GDP for Q3, due later on Thursday.
Indian Rupee (INR) trades on the weaker side on Thursday. The Reserve Bank of India’s (RBI) monthly bulletin emphasized that if headline retail inflation is not brought down to the medium-term target of 4% and tethered there, it could underscore the potential impact on growth.
Indian headline retail inflation rate rose 5.55% in November, worse than the market expectation. According to the RBI's latest estimations, Consumer Price Index (CPI) inflation is seen averaging 4% in July-September 2024. RBI governor Shaktikanta Das stated that reaching 4% should not just be a one-off event, the MPC should have confidence that 4% has become durable.
Investors will monitor the US Gross Domestic Product Annualized (Q3), due later on Thursday. The growth number is projected to remain steady at 5.2%. The attention will shift to November’s Core Personal Consumption Expenditures Price Index (PCE) on Friday, which is estimated to grow 0.2% MoM and 3.3% YoY, respectively.
Daily Digest Market Movers: Indian Rupee stays vulnerable amid the elevated inflation
- India’s foreign exchange reserves stood at $606.9 billion on December 8, 2023, the fourth highest among major foreign exchange reserve-holding countries, having increased by
- $28.4 billion during 2023–24.
- India's total outstanding bonds traded in the market surged to $2.47 trillion in the September quarter from $2.34 trillion in the March quarter.
- According to the RBI's monthly Bulletin, the RBI sold $310 million in the spot foreign currency market in October.
- The International Monetary Fund (IMF) has reclassified India's exchange rate regime from floating to a stabilized arrangement.
- Consumer confidence in the United States increased by the most since early 2021, rising to 110.7 in December from 101.0 the previous month (revised down from 102.0).
- The annual rate of Existing Home Sales jumped to 3.82 million in November, above the market consensus of 3.77 million.
- The market expects the Fed to hold its benchmark rate steady at its January meeting but could begin cutting it as soon as March, according to the CME FedWatch Tool.
Technical Analysis: Indian Rupee to remain range-bound between 82.80 and 83.40
Indian Rupee trades weaker on the day. The USD/INR pair has remained stuck within the 82.80–83.40 range since September. Technically, USD/INR holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. However, further challenges to the key EMA cannot be ruled out as the 14-day Relative Strength Index (RSI) lies below the 50.0 midpoint.
The upper boundary of the trading range at 83.40 acts as an immediate resistance level for USD/INR. A decisive break above 83.40 will see the next hurdle at the year-to-date (YTD) high of 83.47, en route to the psychological round figure of 84.00.
On the downside, the key contention level will emerge at the 83.00 psychological mark. Further south, the next downside stop to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A breach of this level will see a drop to 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 | -0.04% | 0.05% | -0.03% | -0.12% | -0.36% | 0.05% | -0.04% | |
| EUR | 0.03% | 0.09% | 0.02% | -0.08% | -0.29% | 0.10% | 0.00% | |
| GBP | -0.05% | -0.10% | -0.07% | -0.16% | -0.43% | 0.00% | -0.10% | |
| CAD | 0.03% | -0.02% | 0.07% | -0.09% | -0.35% | 0.08% | -0.03% | |
| AUD | 0.12% | 0.06% | 0.15% | 0.08% | -0.25% | 0.16% | 0.05% | |
| JPY | 0.37% | 0.30% | 0.42% | 0.32% | 0.24% | 0.43% | 0.31% | |
| NZD | -0.05% | -0.11% | -0.01% | -0.06% | -0.16% | -0.42% | -0.12% | |
| CHF | 0.06% | 0.00% | 0.10% | 0.02% | -0.07% | -0.31% | 0.10% |
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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