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- USD/INR gains traction ahead of US CPI data
USD/INR gains traction ahead of US CPI data
- Indian Rupee attracts some buyers on the weaker USD and robust foreign inflows.
- India is on track to become one of the top three global economies, Indian Prime Minister Modi said.
- The US Consumer Price Index (CPI) for December will be a closely watched event on Thursday.
Indian Rupee (INR) trades on a positive note on Thursday, supported by robust foreign inflows. On Wednesday, India’s Prime Minister Narendra Modi stated that India is set to become one of the top three global economies. Modi acknowledged India's economic development as a decade of structural reforms that improved the country's capacity and competitiveness amid global headwinds.
The highlight on Thursday will be the US inflation report, as measured by the Consumer Price Index (CPI). The stronger-than-expected inflation data could lift the US Dollar and potentially delay a rate cut from the Federal Reserve (Fed). On Friday, attention will shift to the December Indian CPI, Industrial Production, and Manufacturing Output.
Daily Digest Market Movers: Indian Rupee remains strong amid challenges from external factors
- The World Bank kept its FY25 economic growth projection for India unchanged at 6.4%, owing to strong domestic demand, rising public infrastructure spending, and strong private-sector credit growth.
- Bloomberg Index Services proposed including eligible Indian bonds in its emerging market local currency index from September.
- Finance Minister Nirmala Sitharaman said on Wednesday that India is estimated to be a $5 trillion economy by 2027–28 and become the third largest economy.
- New York Federal Reserve (Fed) President John Williams said that interest rates in the US will likely need to stay high “for some time” until the central bank is confident that inflation is returning to 2%.
- Atlanta Fed Bank President Raphael Bostic emphasized that monetary policy needs to stay tight while inflation remains above the 2% target. Fed’s Bowman stated that the policy is sufficiently restrictive.
- The US Consumer Price Index (CPI) data for December will be due on Thursday at 13:30 GMT. The Core CPI is estimated to show an increase of 3.8% YoY, while headline inflation is projected to grow 3.2% YoY versus 3.1% prior.
Technical Analysis: Indian Rupee could see a downleg in the shorter term
Indian Rupee trades strongly on the day. The USD/INR pair remains stuck within a multi-month trading range between 82.80 and 83.40. According to the daily chart, USD/INR resumes a bearish outlook in the shorter timeframe as the pair holds below the key 100-period Exponential Moving Average (EMA). Additionally, the downward momentum is supported by the 14-day Relative Strength Index (RSI) that stands below the 50.0 midpoint.
A breach below the 83.00 psychological level will see a drop to the critical contention level at 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. Further south, the next downside target is located at a low of August 11 at 82.60. On the other hand, the immediate resistance level for USD/INR will emerge near the upper boundary of the trading range at 83.40. A break above 83.40 will expose a 2023 high of 83.47, followed by the psychological figure at 84.00.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.06% | -0.17% | -0.13% | -0.30% | -0.22% | -0.29% | -0.15% | |
| EUR | 0.06% | -0.12% | -0.08% | -0.25% | -0.17% | -0.25% | -0.07% | |
| GBP | 0.16% | 0.12% | 0.05% | -0.12% | -0.04% | -0.13% | 0.06% | |
| CAD | 0.13% | 0.07% | -0.05% | -0.18% | -0.10% | -0.16% | 0.00% | |
| AUD | 0.29% | 0.25% | 0.14% | 0.17% | 0.09% | 0.00% | 0.17% | |
| JPY | 0.21% | 0.16% | 0.04% | 0.07% | -0.08% | -0.06% | 0.08% | |
| NZD | 0.29% | 0.26% | 0.12% | 0.15% | -0.01% | 0.07% | 0.15% | |
| CHF | 0.13% | 0.06% | -0.06% | -0.01% | -0.17% | -0.10% | -0.16% |
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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