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- USD/INR extends its upside ahead of Indian, US Services PMI data
USD/INR extends its upside ahead of Indian, US Services PMI data
- Indian Rupee (INR) trades on a softer note on the modest US Dollar demand.
- Analysts said global economic growth is likely to surprise on the upside, and only modest headwinds for India next fiscal.
- Investors await the Indian S&P Global Services PMI and the US ISM Services PMI for February on Tuesday.
Indian Rupee (INR) edges lower on Tuesday amid the modest rebound of the US Dollar (USD). India’s GDP grew at its fastest pace in 18 months, expanding 8.4% over a year earlier in the October-December quarter. Additionally, most high-frequency indicators continued to grow, showing signs of resilient economic activity.
Furthermore, most high-frequency indicators continued to improve, indicating strong economic activity. S&P Global Ratings Global Chief Economist, Paul Gruenwald said that global economic growth is likely to surprise on the upside, and hence he sees only modest headwinds for India next fiscal.
Market players will keep an eye on the Indian S&P Global Services PMI and US ISM Services PMI for February, due on Tuesday. Later this week, the attention will be on the Fed's Chair Jerome Powell testifying on Wednesday ahead of the US Nonfarm Payrolls (NFP) on Friday.
Daily Digest Market Movers: Indian Rupee weakens amid the uncertainties
- India's GDP growth is projected to grow 6.8% for the 2024 calendar year from 6.1% earlier, according to the global rating agency Moody's.
- The Reserve Bank of India (RBI) is expected to take delivery of a $5 billion FX swap due next week, owing to adequate dollar inflows and rupee liquidity staying on the tighter side.
- India's foreign exchange reserves rose by $2.975 billion to $619.072 billion for the week ending on February 23, according to the RBI.
- Indian S&P Global Services PMI is estimated to improve from 61.8 in January to 62.0 in February.
- Fed President Raphael Bostic said on Monday that the central bank is under no urgent pressure to cut interest rates given a "prospering" economy and job market.
Technical Analysis: Indian Rupee inches lower within a longer-term band of 82.65-83.15
Indian Rupee trades weaker on the day. USD/INR remains confined within a multi-month-old descending trend channel between 82.65 and 83.15 since December 8, 2023.
USD/INR keeps the bearish vibe unchanged in the near term as the pair holds below the 100-day Exponential Moving Average on the daily timeframe. Additionally, the 4-day Relative Strength Index (RSI) lies in the bearish territory below the 50.0 midlines, suggesting that further decline looks favorable.
The first downside target will emerge at the lower limit of the descending trend channel at 82.65. Any follow-through selling will see a drop to a low of August 23, and finally a low of June 1 at 82.25.
On the upside, the key resistance level is located at 83.00, representing the 100-day EMA and a psychological round figure. A decisive break above the latter will see a rally to a high of January 2 at 83.35, en route to 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 .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.04% | 0.05% | 0.09% | 0.01% | 0.14% | -0.01% | |
| EUR | -0.04% | -0.01% | 0.01% | 0.03% | -0.02% | 0.07% | -0.01% | |
| GBP | -0.03% | 0.01% | 0.01% | 0.03% | -0.01% | 0.11% | -0.02% | |
| CAD | -0.05% | -0.01% | -0.02% | 0.01% | -0.03% | 0.06% | -0.04% | |
| AUD | -0.10% | -0.04% | -0.04% | -0.02% | -0.05% | 0.05% | -0.05% | |
| JPY | -0.01% | 0.04% | 0.01% | 0.05% | 0.05% | 0.14% | -0.02% | |
| NZD | -0.14% | -0.08% | -0.11% | -0.08% | -0.05% | -0.12% | -0.10% | |
| CHF | -0.03% | 0.02% | 0.00% | 0.04% | 0.06% | -0.02% | 0.11% |
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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