USD/INR holds positive ground on the renewed USD demand during US, India holidays
|- Indian Rupee edges lower amid the recovery in USD.
- Many analysts predicted Q2 Indian GDP to expand faster than the RBI's 6.5%.
- Investors will monitor the US S&P Global PMI ahead of India’s quarterly growth numbers next week.
Indian Rupee (INR) loses ground on Friday as the US Dollar (USD) attracts some buyers during the session. India's economy has shown resilience in the face of the global downturn, owing to its dependence on local demand. Many analysts projected the second-quarter (Q2) Indian GDP from the Central Statistical Office to grow faster than the 6.5% expected by the Reserve Bank of India (RBI).
In the meantime, oil prices need to be closely monitored as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will hold their next meeting on November 30 to discuss oil supply cuts. That being said, India is particularly vulnerable to higher crude prices as the country is the world's third-biggest oil consumer.
The US market was closed on Thursday in observance of Thanksgiving Day, and the trading session on Friday will be shortened. Market players will keep an eye on the US S&P Global PMI data for fresh impetus. Next week, the Indian market will be closed on Monday for the Guru Nanak Jayanti holiday. Nonetheless, the highlight will be India’s Gross Domestic Product (GDP) Quarterly for the second quarter, due on Thursday.
Daily Digest Market Movers: Indian Rupee remains vulnerable to global factors
- According to a Reuters poll of equity strategists, the Indian stock market is set to hit new highs in the next six months and rise over 10% by end-2024.
- The Reserve Bank of India (RBI) Governor Shaktikanta Das estimated a 6.5% growth in India's real GDP in fiscal years 2023-24 and 2024-25.
- RBI’s Das said the Indian Rupee has shown moderate volatility and orderly movements as compared to its peers despite elevated US Treasury yields and a strong USD.
- RBI's Das emphasized that India is vulnerable to food-price shocks from extreme weather events and global factors.
- India’s Ministry of Finance said in the report that the government and the RBI will closely monitor inflationary risks.
- RBI projected that average inflation will drop from 6.7% in the previous fiscal year to 5.4% in 2023-24.
- The US S&P Global Manufacturing PMI is estimated to drop from 50.0 to 49.8 and Services PMI is expected to fall from 50.6 to 50.4.
- The US Jobless Claims, Durable Goods Orders, and Consumer Sentiment suggested the economy is easing but remains strong enough to avoid recession.
- Market players believe the Federal Reserve (Fed) may be done raising interest rates and the economy is still resilient.
Technical Analysis: The Indian Rupee maintains its positive stance
The Indian Rupee trades weaker on the day. The USD/INR pair breaks above the trading range of 82.80–83.35 since September. According to the daily chart, the technical outlook suggests that the bullish bias stays intact as the pair holds above the key 100-day Exponential Moving Average (EMA) with an upward slope. Furthermore, the 14-day Relative Strength Index (RSI) holds above the 50.0 midline, reflecting that further upside looks favorable.
That being said, the year-to-date (YTD) high of 83.47 will be the immediate resistance level for USD/INR, en route to a psychological round mark at 84.00. On the flip side, 83.35 acts as a throwback support. Any follow-through selling below 83.35 will see a drop to the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A decisive break below 82.80 will pave the way to a low of August 11 at 82.60.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.49% | -1.00% | -0.39% | -1.45% | -0.88% | -1.55% | -0.49% | |
| EUR | 0.48% | -0.51% | 0.09% | -0.97% | -0.39% | -1.06% | 0.00% | |
| GBP | 0.98% | 0.50% | 0.59% | -0.47% | 0.11% | -0.55% | 0.51% | |
| CAD | 0.38% | -0.06% | -0.60% | -1.03% | -0.48% | -1.15% | -0.09% | |
| AUD | 1.43% | 0.97% | 0.45% | 1.05% | 0.57% | -0.08% | 0.96% | |
| JPY | 0.87% | 0.42% | -0.09% | 0.51% | -0.58% | -0.67% | 0.38% | |
| NZD | 1.52% | 1.04% | 0.54% | 1.14% | 0.09% | 0.65% | 1.03% | |
| CHF | 0.49% | 0.00% | -0.49% | 0.09% | -0.97% | -0.39% | -1.05% |
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).
RBI FAQs
What is the role of the Reserve Bank of India?
The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
How do the decisions of the Reserve Bank of India affect the Rupee?
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Does the Reserve Bank of India directly intervene in FX markets?
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.
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