- The Indian Rupee loses ground despite the weaker US Dollar in Monday’s early European session.
- Indian HSBC Manufacturing PMI rose to 58.3 in June versus 57.5 prior, worse than the 58.5 expected.
- Indian bonds were included in the JPMorgan Emerging Market Debt Index, which might boost India’s foreign inflows and the INR.
- The US ISM Manufacturing PMI report will be in the spotlight on Monday.
The Indian Rupee (INR) trims gains on Monday despite the softer US Dollar (USD). The local currency edges lower after the release of India’s HSBC Manufacturing Purchasing Managers Index (PMI). The figure rose to 58.3 in June from the previous reading of 57.5, weaker than the expectation of 58.5. Meanwhile, further gains in crude oil prices might exert some selling pressure on the pair, as India is the world’s third-largest oil consumer after the United States (US) and China.
The foreign inflows by the inclusion of India's bonds in the JPMorgan emerging market debt index are expected to trigger billions of dollars into the world's fifth-largest economy, boosting the INR. Furthermore, the softer US Personal Consumption Expenditures (PCE) Price Index for May, which has its lowest annual rate in more than three years, might weigh on the Greenback and act as a headwind against the pair. Looking ahead, investors will focus on the US ISM Manufacturing PMI for June. Any signs of weakness in the US economy could exert some selling pressure on the USD.
Daily Digest Market Movers: Indian Rupee loses momentum on the weaker India's Manufacturing PMI data
- According to S&P Global, the India's Manufacturing PMI growth was boosted by a record high rate of job creation. The employment rate was supported by buoyant demand conditions that fueled expansions in new orders, output levels, and procurement activities across the sector.
- Foreign currency market indicators had pointed to inflows, most likely owing to passive funds purchasing bonds, but many market players said inflows were lower than expected. Traders estimated inflows of up to $2 billion spread over Thursday and Friday.
- India’s equity benchmarks, the Sensex and the Nifty 50, ended the first half of the current calendar year on a positive note. The Nifty 50 rose 10.5%, while the Sensex gained 9.4% in the first six months of 2024, hitting record highs of 24,174 and 79,671.58, respectively.
- The US Personal Consumption Expenditures (PCE) Price Index increased 2.6% YoY in May, compared to 2.7% in April. This figure came in line with the market expectations. The core PCE inflation rose 2.6% YoY in May from 2.8% in April, which is in line with the estimation.
- San Francisco Fed President Mary Daly said on Friday that monetary policy is working, but it’s too early to tell when it will be appropriate to cut the interest rate. Daly further stated, "If inflation stays sticky or comes down slowly, rates would need to be higher for longer.”
- The US ISM Purchasing Managers Index (PMI) is estimated to improve to 49.0 in June from 48.7 in May.
Technical analysis: USD/INR might face some sell-off or consolidation in the near term
The Indian Rupee trades on a softer note on the day. The bullish outlook of the USD/INR pair remains intact on the daily timeframe as the pair holds above the key 100-day Exponential Moving Average (EMA). However, USD/INR could resume its downside journey if the pair crosses below the 100-day EMA. Additionally, the 14-day Relative Strength Index (RSI) stands below the 50-midline, indicating that further downside or consolidation cannot be ruled out.
Extended gains above 83.65, a high of June 26, will see a rally to the all-time high of 83.75. Any follow-through buying above this level will pave the way to the 84.00 psychological level.
On the other hand, the key support level for the pair is seen at the 83.30-83.35 region, the 100-day EMA. The additional downside level will expose the 83.00 round figure.
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 | -0.74% | -0.34% | -0.23% | -0.55% | 0.69% | 0.16% | 0.49% | |
| EUR | 0.71% | 0.37% | 0.50% | 0.19% | 1.41% | 0.88% | 1.20% | |
| GBP | 0.35% | -0.38% | 0.12% | -0.18% | 1.03% | 0.51% | 0.84% | |
| CAD | 0.23% | -0.53% | -0.13% | -0.33% | 0.91% | 0.39% | 0.73% | |
| AUD | 0.54% | -0.19% | 0.18% | 0.28% | 1.22% | 0.68% | 1.06% | |
| JPY | -0.70% | -1.43% | -1.06% | -0.92% | -1.24% | -0.52% | -0.18% | |
| NZD | -0.17% | -0.90% | -0.51% | -0.39% | -0.70% | 0.53% | 0.33% | |
| CHF | -0.49% | -1.22% | -0.85% | -0.73% | -1.04% | 0.21% | -0.34% |
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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