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- USD/INR attracts some buyers, eyes on RBI rate decision, US NFP data
USD/INR attracts some buyers, eyes on RBI rate decision, US NFP data
- Indian Rupee trades in negative territory on the stronger USD demand.
- The escalating Middle East geopolitical tensions and the rise in oil prices weigh on the INR.
- The RBI will announce the interest rate decision on Friday, which is expected to leave the repo rate unchanged at 6.50%.
Indian Rupee (INR) loses its recovery momentum on Friday amid persistent US Dollar (USD) demand, which is most likely from importers. Meanwhile, the rising geopolitical tensions in the Middle East and the upsurge in oil prices exert some selling pressure on the INR and lift the safe-haven currency like the Greenback. However, the downside of the local currency might be limited by the RBI's two-way FX intervention to keep the INR stable.
The RBI Monetary Policy Committee (MPC) will announce the interest rate decision on Friday at 4.30 GMT. Markets widely anticipate the Indian central bank to keep the repo rate unchanged at 6.50% and cut the rates in the third quarter. On the US docket, the US employment data, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings for March, will be in the spotlight. The US NFP figure is estimated to see 200K jobs added to the US economy in March.
Daily Digest Market Movers: Indian Rupee remains weakened amid geopolitical tension
- The CIA on Thursday reportedly warned Israel that Iran will attack within the next 48 hours after Israel attacked Tehran's consulate in Syria, killing two Iranian military leaders, per the Express.
- India’s HSBC Service PMI rose to 61.2 in March from 60.6 in February, better than market expectations.
- The INR will strengthen only marginally against the USD over the coming three months as the RBI uses its FX reserves to manage volatility and keep the currency relatively strong, according to a Reuters poll.
- The INR exchange rate would be unaffected by the recent volatility in the currency's exchange-traded derivatives, which was caused by traders unwinding positions to comply with a central bank rule, four bankers said on Thursday.
- The US Initial Jobless Claims for the week ended March 30 rose by 9,000 to 221,000 from the previous week of 212,000, below the market consensus of 214,000. The Continuing Claims declined by 19K to 1.791M in the week ended March 23.
- Fed Bank of Richmond President Thomas Barkin said disinflation is likely to continue, but the speed of that remains unclear. He further stated that maintaining rates 'somewhat restrictive' will bring inflation back to target.
Technical analysis: USD/INR prospects remain positive in the longer term
The Indian Rupee trades weaker on the day. The bullish stance of USD/INR remains unchanged in the long term since the pair has risen above a nearly four-month-old descending trend channel since March 22.
In the short term, USD/INR is above the key 100-day Exponential Moving Average (EMA) on the daily chart, with the 14-day Relative Strength Index (RSI) holding in bullish territory around 65.0. This suggests that support zones are more likely to hold than to break.
A break past a high of April 3 at 83.55 could pave the way to the next resistance level at an all-time high of 83.70 en route to the 84.00 psychological round mark. On the flip side, the first downside target will emerge near a high of March 21 at 83.20. The potential support level is located at the 83.00–83.50 zone (round mark, the 100-day EMA). A breach of this level could see a drop to a low of March 14 at 82.80.
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 .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.10% | 0.12% | 0.23% | 0.37% | -0.09% | 0.31% | 0.09% | |
| EUR | -0.10% | 0.03% | 0.12% | 0.28% | -0.18% | 0.22% | -0.02% | |
| GBP | -0.12% | -0.02% | 0.10% | 0.26% | -0.21% | 0.19% | -0.04% | |
| CAD | -0.23% | -0.13% | -0.10% | 0.15% | -0.31% | 0.09% | -0.15% | |
| AUD | -0.37% | -0.27% | -0.25% | -0.13% | -0.46% | -0.06% | -0.30% | |
| JPY | 0.07% | 0.18% | 0.19% | 0.28% | 0.43% | 0.40% | 0.15% | |
| NZD | -0.33% | -0.21% | -0.19% | -0.08% | 0.06% | -0.40% | -0.25% | |
| CHF | -0.09% | 0.02% | 0.04% | 0.14% | 0.29% | -0.17% | 0.23% |
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
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.
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.
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.
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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