USD/INR remains firm, eyes on US Jobless Claims
|- Indian Rupee edges lower on the firmer US Dollar.
- The Reserve Bank of India (RBI) will likely maintain its policy stance in its December meeting.
- US weekly Initial Jobless Claims will be due later on Thursday.
Indian Rupee (INR) trades soft on Thursday amid renewed US Dollar (USD) demand. Nonetheless, the markets anticipate that the US interest rate may have peaked and the Federal Reserve (Fed) will ease policy rates next year. The possibility of a Fed rate cut in the middle of 2024 could drag the US Treasury bond yields lower, which benefits the INR. The Reserve Bank of India (RBI) could maintain its policy stance in its December meeting after October’s inflation data came within the central bank's 2-6% target for the second consecutive month.
Investors will monitor the US weekly Initial Jobless Claims due later on Thursday. In the meantime, the Indian Rupee remains vulnerable to higher crude prices as India is the world's third-biggest oil consumer.
Daily Digest Market Movers: Indian Rupee remains sensitive to the spike in oil prices
- India's trade deficit narrowed to $31.46B in October from $19.37B in September.
- India’s Exports grew by 6.2% to $33.57B in October from $34.47B in September while Imports stood at $65.03B from $53.84B in the previous month. The rise in global crude oil prices increased the country's import cost.
- India's headline retail price inflation declined to 4.9% in October versus 5% prior, a four-month low.
- India’s Wholesale Price Index (WPI) inflation arrived at -0.52% from the previous reading of -0.26%, below the market consensus of -0.20%.
- India’s Consumer Price Index (CPI) rose by 4.87% YoY in October from 5.02% in September, above the market expectation of 4.80%.
- The Reserve Bank of India (RBI) is likely to maintain its hawkish stance at its December monetary policy meeting.
- The US Producer Price Index (PPI) dropped by 0.5% MoM in October from a 0.4% rise in September. The annual PPI figure came in at 1.3% in the same period from 2.2% previously.
- US Retail Sales declined by 0.1% in October versus a 0.9% increase prior, against expectations of a fall of 0.3%.
- Fed fund futures are now pricing no further US rate hikes in this cycle, and have priced in 50% odds of a rate cut by May 2024.
Technical Analysis: The Indian Rupee’s bearish stance stays intact
The Indian Rupee trades on a softer note on the day. The USD/INR pair has traded within the wider trading range of 82.80-83.35 since September. According to the daily chart, the USD/INR maintains a bullish outlook as the pair holds above the key 100-day Exponential Moving Average (EMA).
The immediate resistance level for the pair is seen near the upper boundary of the trading range of 83.35. Any follow-through buying will see a rally to a year-to-date (YTD) high of 83.47. Further north, the next target to watch is a psychological round figure at 84.00.
On the downside, a low of September 12 at 82.80 acts as an initial support level for USD/INR. A decisive break below 82.80 will see losses extend to a low of August 11 at 82.60. The next contention level is located near a low of August 24 at 82.37.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.18% | -0.89% | -0.72% | -1.16% | 0.32% | -1.25% | -1.21% | |
| EUR | 1.19% | 0.32% | 0.48% | 0.05% | 1.51% | -0.04% | -0.01% | |
| GBP | 0.90% | -0.30% | 0.19% | -0.27% | 1.22% | -0.36% | -0.31% | |
| CAD | 0.72% | -0.47% | -0.15% | -0.44% | 1.04% | -0.54% | -0.49% | |
| AUD | 1.17% | -0.01% | 0.30% | 0.45% | 1.48% | -0.09% | -0.04% | |
| JPY | -0.32% | -1.51% | -1.22% | -1.05% | -1.50% | -1.59% | -1.55% | |
| NZD | 1.23% | 0.09% | 0.35% | 0.55% | 0.09% | 1.57% | 0.05% | |
| CHF | 1.20% | 0.04% | 0.34% | 0.50% | 0.06% | 1.52% | -0.02% |
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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