USD/INR gathers strength ahead of Indian CPI data
|- Indian Rupee trades on a negative note on Friday.
- Rising oil prices and higher US Treasury bond yields could weigh on the INR, limiting the downside of USD/INR.
- The Indian March CPI inflation report and US April Michigan Consumer Sentiment Index will be in the spotlight on Friday.
Indian Rupee (INR) trades softer on Friday amid the renewed US Dollar (USD) demand. The rise in oil prices and higher US Treasury bond yields might drag the INR lower and cap the downside of USD/INR. However, the robust Indian economic performance and positive longer-term outlook might lift the INR.
Investors will keep an eye on the Indian CPI inflation report for March and Industrial Production for February, due on Friday. A hotter-than-expected Indian inflation data could further boost the INR. On the US docket, the preliminary US Michigan Consumer Sentiment Index for April will be released later, along with the Fed's Bostic and Daly speech.
Daily Digest Market Movers: Indian Rupee remains strong due to the robust Indian economy
- Sanjeev Sanyal, a member of the Economic Advisory Council to the Prime Minister (EAC-PM), said that India's economic growth performance is 'good' and that efforts are needed to maintain it since worries about global factors remain unresolved.
- India's CPI inflation is expected to show an increase of 4.91% in March, according to a Reuters poll. The figure remains above the Reserve Bank of India's (RBI) 4% medium-term target as persistent food price increases.
- The US Producer Price Index (PPI) data for March rose by 2.1% YoY, missing the estimation of 2.2%. The core PPI, excluding volatile food and energy prices, climbed by 2.4% YoY, compared to the market consensus of 2.3%.
- The recent US CPI inflation data and Nonfarm Payrolls (NFP) triggered the speculation that the Fed will have to push back the number and timing of interest rate cuts this year.
- Investors are now pricing in only two rate cuts this year, which will most likely begin in September, according to CME FedWatch Tool.
Technical analysis: USD/INR keeps bullish stance in the longer term
The Indian Rupee trades stronger on the day. USD/INR prospects remain positive in the long term since the pair has risen above a nearly four-month-old descending trend channel since March 22.
In the near term, USD/INR is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is backed by the 14-day Relative Strength Index (RSI), which holds in bullish territory around 55.00, suggesting that further upside looks favorable.
The immediate resistance level of the pair will emerge near a high of April 11 at 83.40. The next hurdle is located at an all-time high of 83.70, en route to the 84.00 psychological level. On the flip side, the potential support level is seen near the congestion of the round figure and the 100-period EMA at the 83.00–83.10 region. A decisive break below this zone might pave the way to a low of March 14 at 82.80, followed by a low of March 11 at 82.65.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the .
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.13% | 0.68% | 0.77% | 0.72% | 0.99% | 0.29% | 0.85% | |
| EUR | -1.15% | -0.45% | -0.36% | -0.40% | -0.13% | -0.84% | -0.29% | |
| GBP | -0.69% | 0.45% | 0.09% | 0.04% | 0.32% | -0.39% | 0.17% | |
| CAD | -0.77% | 0.36% | -0.09% | -0.07% | 0.23% | -0.50% | 0.08% | |
| AUD | -0.73% | 0.40% | -0.05% | 0.04% | 0.27% | -0.44% | 0.11% | |
| JPY | -1.01% | 0.14% | -0.31% | -0.23% | -0.28% | -0.70% | -0.14% | |
| NZD | -0.29% | 0.83% | 0.39% | 0.47% | 0.43% | 0.70% | 0.55% | |
| CHF | -0.86% | 0.27% | -0.17% | -0.08% | -0.13% | 0.14% | -0.57% |
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 economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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