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- USD/INR loses its recovery momentum, Indian, US PMI data eyed
USD/INR loses its recovery momentum, Indian, US PMI data eyed
- Indian Rupee trades on a stronger note amid the decline of USD.
- The pace of Indian GDP growth was the strongest among major economies last quarter.
- India’s S&P Global Manufacturing PMI and the US ISM Manufacturing PMI Index will be the highlights on Friday.
Indian Rupee (INR) recovers some lost ground on Friday. However, the US Dollar (USD) demand from foreign and state-run banks might cap an uptick of the pair. The pace of GDP growth in the Indian economy was the strongest among major economies last quarter. Prime Minister Narendra Modi's administration has been swiftly attracting multinational corporations to establish factories in the country while spending billions of dollars to improve highways, ports, airports, and trains.
The International Monetary Fund (IMF) forecast India's GDP will grow by 6.5% in 2024. Nonetheless, the rebound in oil prices and elevated domestic inflation might cap the upside of the USD/INR pair.
Investors will focus on India’s S&P Global Manufacturing PMI ahead of the US ISM Manufacturing PMI Index, due on Friday. Also, Fed’s Williams, Logan, Waller, Bostic, Daly, and Kluger are set to speak later in the day. The stronger-than-expected US PMI data might trigger speculation about the delay of interest rate cuts, which will provide some support to the Greenback and USD/INR.
Daily Digest Market Movers: Indian Rupee remains strong amid the uncertainties
- The Indian economy grew by 8.4% during the October-December quarter of FY24, better than the estimation of 7.3%, according to the Statistics Ministry.
- India’s GDP Annual growth rate expanded by 7.6% from 7.2%.
- The US Personal Consumption Expenditure (PCE) Price Index eased from 2.6% to 2.4% YoY, in line with market expectations.
- The Core PCE, the Fed preferred inflation gauge, rose by 2.8% YoY in January compared to December’s reading of. 2.9%, matching the consensus.
- Atlanta Fed President Raphael Bostic said that the recent inflation data indicates the road back to the central bank’s 2% inflation target will be “bumpy.”, while Chicago Fed President Austan Goolsbee, stated that he expects the first rate cuts later this year, but he cannot specify the timeline.
- Investors have already fully priced out a Fed rate cut in March but priced in 50% odds of a rate cut in the June meeting.
Technical Analysis: Indian Rupee remains capped in the longer-term range-bound theme
Indian Rupee trades strongly on the day. USD/INR remains confined within a multi-month-old descending trend channel between 82.70 and 83.20 since December 8, 2023.
In the short term, USD/INR keeps the negative bias unchanged as the pair is still below the 100-day Exponential Moving Average on the daily timeframe. Furthermore, the 14-day Relative Strength Index (RSI) holds in the negative zone below the 50.0 midline, supporting the sellers for the time being.
The initial support level for the pair is seen at the lower limit of the descending trend channel at 82.70. A breach of this level might convince USD bears to extend the pair’s downtrend near a low of August 23 at 82.45, followed by a low of June 1 at 82.25.
In the case of a bullish trading environment, the critical upside barrier will emerge at the 83.00 mark, portraying the confluence of the 100-day EMA and a psychological round figure. Further north, the next hurdle to watch is a high of January 2 at 83.35, and finally 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 | -0.13% | -0.06% | -0.09% | -0.20% | 0.17% | -0.12% | -0.03% | |
| EUR | 0.13% | 0.08% | 0.03% | -0.06% | 0.31% | 0.00% | 0.11% | |
| GBP | 0.06% | -0.07% | -0.04% | -0.13% | 0.24% | -0.07% | 0.03% | |
| CAD | 0.09% | -0.03% | 0.04% | -0.09% | 0.28% | -0.02% | 0.07% | |
| AUD | 0.20% | 0.04% | 0.13% | 0.09% | 0.37% | 0.06% | 0.16% | |
| JPY | -0.17% | -0.29% | -0.21% | -0.26% | -0.34% | -0.29% | -0.20% | |
| NZD | 0.13% | -0.02% | 0.06% | 0.04% | -0.07% | 0.29% | 0.10% | |
| CHF | 0.04% | -0.10% | -0.02% | -0.06% | -0.15% | 0.22% | -0.09% |
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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