- The Indian Rupee gains ground in Monday’s Asian session.
- Elevated oil prices might pressure the INR, while the renewed US Dollar demand might cap the local currency’s gains.
- Investors await the US Chicago Fed National Activity Index ahead of India’s Federal Budget on Tuesday.
The Indian Rupee (INR) trades on a stronger note on Monday amid the weaker US Dollar (USD). The rising speculations of a Federal Reserve (Fed) easing move in September have weighed on the Greenback in previous sessions. However, the high demand for USD, especially for defense and oil payments, might exert some selling pressure on the local currency. The downside for the INR might be limited amid the likely Reserve Bank of India (RBI) intervention to prevent a sharp depreciation in the Indian Rupee.
The US Chicago Fed National Activity Index for June is due on Monday. The highlights for this week will be the preliminary US S&P Global Purchasing Managers Index (PMI) for July, Gross Domestic Product (GDP) for the second quarter and the Personal Consumption Expenditures Price Index (PCE) data for June, which will be released on Wednesday, Thursday and Friday, respectively. On the Indian docket, traders will keep an eye on the Indian Union Budget on Tuesday.
Daily Digest Market Movers: Indian Rupee edges higher amid weaker US Dollar
- The Indian Rupee closed at a record closing low of 83.6625 against the US Dollar on Friday, with likely intervention by the Reserve Bank of India (RBI) to stem losses. The currency was down 0.1% for the week, according to Reuters.
- India’s equity benchmark, BSE Sensex, fell 739 points, or 0.91%, to 80,605 on Friday. Meanwhile, the Nifty index closed at 24,531, down 270 points, or 1.1 % from its previous close.
- "We expect the Rupee to trade with a slight negative bias on weak global markets and a strength in the US Dollar. Weak Asian and European currencies may also weigh on the rupee," said Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas.
- New York Federal Reserve President John Williams said on Friday that an interest rate cut could be warranted in the coming months, but not at its July policy meeting, per WSJ.
- Financial markets are now pricing in the probability of a move at its July meeting less than 5% and pricing in nearly full rate cut is firmly expected in September, according to the CME FedWatch Tool.
Technical analysis: USD/INR keeps bullish vibe in the long term
The Indian Rupee trades firmer on the day. The uptrend has been in play for the USD/INR pair as it has confirmed a breakout above the month-long trading range while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. Furthermore, the upward momentum is also supported by the 14-day Relative Strength Index (RSI) points higher above 63.60, suggesting that further upside could be on the horizon.
The immediate resistance level for the pair will emerge at the all-time high of 83.77. The crucial hurdle is seen at the 84.00 psychological level.
On the downside, the resistance-turned-support level at 83.65 acts as an initial contention level. The additional downside filter to watch is 83.51 (low of July 12), followed by 83.40 (100-day EMA).
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.08% | 0.09% | 0.18% | 0.41% | 0.06% | 0.44% | 0.06% | |
| EUR | -0.11% | 0.00% | 0.08% | 0.31% | -0.05% | 0.36% | -0.05% | |
| GBP | -0.09% | -0.02% | 0.08% | 0.30% | -0.06% | 0.35% | -0.06% | |
| CAD | -0.18% | -0.09% | -0.07% | 0.22% | -0.13% | 0.27% | -0.14% | |
| AUD | -0.41% | -0.31% | -0.30% | -0.21% | -0.36% | 0.07% | -0.35% | |
| JPY | -0.06% | 0.05% | 0.04% | 0.13% | 0.32% | 0.39% | -0.01% | |
| NZD | -0.45% | -0.38% | -0.34% | -0.27% | -0.06% | -0.40% | -0.41% | |
| CHF | -0.05% | 0.05% | 0.06% | 0.14% | 0.36% | -0.01% | 0.41% |
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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