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- USD/INR gains ground ahead of US ADP report
USD/INR gains ground ahead of US ADP report
- Indian Rupee trades weaker amid the firmer USD.
- Goldman Sachs predicts a positive trajectory for the Indian economy in 2024.
- Investors await the US ADP Employment Change and Initial weekly Jobless Claims, due later on Thursday.
Indian Rupee (INR) continues to trade on a softer note on Thursday amid the stronger US Dollar (USD) broadly. Goldman Sachs Chief India Economist Santanu Sengupta said that India's positive perspective is fuelled by expectations of substantial foreign capital inflows, especially as the Reserve Bank of India (RBI) continues to accumulate inflows and build currency reserves at every possible opportunity.
In 2023, the Indian economy expanded at 6.5%, outperforming most major countries. However, given the global economic picture, the road ahead may be challenging. Furthermore, the Indian election in mid-2024 will be closely watched as it could impact investors' sentiment.
Later on Thursday, the US ADP Employment Change and Initial weekly Jobless Claims will be released. The spotlight this week will be the US employment data, including the highly anticipated US Nonfarm Payrolls (NFP). December’s NFP figure is expected to show an increase of 170K, compared to 199K in November.
Daily Digest Market Movers: Indian Rupee maintains a bullish path amid the multiple challenges
- The Indian S&P Global Manufacturing PMI for December arrived at 54.0 versus 56.0 prior, below the market consensus of 55.9.
- Economists at Citi forecast a modest 50 basis points (bps) drop in the GDP growth rate for India in the fiscal year 2025.
- US ISM Manufacturing PMI for December rose to 47.4 from 46.7 in the previous reading, above the market consensus of 47.1.
- The minutes of the FOMC meeting in December stated that participants believe the policy rate to be at or near its peak for this tightening cycle, but the actual policy path would depend on how the economy evolves.
- Richmond Fed President Thomas Barkin said that interest rate hikes remain on the table despite progress in inflation control.
- US S&P Global Manufacturing PMI eased to 47.9 in December from 48.2 in November, weaker than expectations.
Technical Analysis: Indian Rupee sticks to the longer-term range since September
Indian Rupee extends its downside on the day. The USD/INR pair remains stuck in a multi-month-old trading range of 82.80–83.40. According to the daily chart, the further upside looks favorable as the pair holds above the key 100-period Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) is above the 50.0 midpoint, supporting the upward momentum.
The first resistance level for USD/INR will emerge at the upper boundary of the trading range at 83.40. A decisive break above 83.40 will open the door to a 2023 high of 83.47, then the psychological figure at 84.00. On the other hand, 83.00 acts as an initial support level for the pair. The additional downside filter to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80, and finally 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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.00% | -0.07% | -0.09% | 0.24% | -0.24% | -0.07% | |
| EUR | 0.02% | 0.02% | -0.05% | -0.07% | 0.25% | -0.21% | -0.05% | |
| GBP | 0.00% | -0.01% | -0.07% | -0.07% | 0.24% | -0.22% | -0.06% | |
| CAD | 0.07% | 0.05% | 0.07% | 0.00% | 0.32% | -0.16% | 0.04% | |
| AUD | 0.07% | 0.06% | 0.07% | 0.00% | 0.31% | -0.16% | 0.00% | |
| JPY | -0.25% | -0.24% | -0.25% | -0.32% | -0.35% | -0.49% | -0.32% | |
| NZD | 0.22% | 0.21% | 0.23% | 0.15% | 0.15% | 0.46% | 0.15% | |
| CHF | 0.06% | 0.06% | 0.07% | -0.02% | -0.03% | 0.30% | -0.17% |
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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