- The Indian Rupee weakens in Wednesday’s early Asian session.
- USD demand and cautious mood might undermine the INR, while lower crude oil prices and RBI intervention could limit losses.
- Investors will closely monitor the Federal Reserve’s (Fed) interest rate decision on Wednesday.
The Indian Rupee (INR) edges lower on Wednesday. The weakness of local currency is largely driven by persistent US Dollar (USD) high demand for month-end payments, dragging the INR lower near record lows over the last few trading sessions. The cautious mood and escalating geopolitical tensions in the Middle East could weigh on the INR.
However, a further decline in crude oil prices could support the Indian Rupee as India is the third largest consumer of oil behind the US and China. The volatility might be limited as the Reserve Bank of India (RBI) is expected to continue intervening to limit sudden depreciation.
The US Federal Reserve (Fed) is widely anticipated to hold the interest rate in the range of 5.25%-5.50% at its two-day FOMC meeting that concludes on Wednesday. Traders will keep an eye on Fed Chair Jerome Powell’s press conference, which might offer some hints about the Fed’s potential rate cut plans. On the Indian docket, the final reading of HSBC Manufacturing PMI will be published on Thursday, which is projected to improve to 58.5 in July from the previous reading of 58.3.
Daily Digest Market Movers: Indian Rupee remains vulnerable near record lows
- Foreign investors invested in Indian shares for about $509.9 million on July 26, while withdrawing from Indian bonds the same day for around $78.7 million.
- The RBI has implemented additional restrictions on foreign ownership of newly issued bonds. The focus is on the billions of dollars flowing into the local market due to the inclusion of Indian bonds in JPMorgan's emerging market index, per Bloomberg.
- The US Job Openings and Labor Turnover Survey (JOLTS) reported 8.184 million job openings in June, above the market expectation of 8.03 million but lower than May’s revised figure of 8.23 million.
- US Consumer Confidence rose to 100.3 in July from the revised figure of 97.8 in June. This figure came in above the market consensus of 99.7, according to the Conference Board on Tuesday.
- With inflation easing faster than estimated in June, the markets have priced in nearly a 64% chance that the Fed will cut rates three times this year — September, November and December, according to the CME FedWatch.
Technical analysis: USD/INR’s constructive outlook remains in play
Indian Rupee trades softer on the day. The outlook for the USD/INR pair appears to be bullish on the daily timeframe, as the pair has held above the key 100-day Exponential Moving Average (EMA) and is depicted by an uptrend line since June 3. Additionally, the 14-day Relative Strength Index (RSI) points higher above the midline near 60.25, showing signs of bullish momentum.
The crucial resistance level will emerge at the all-time high of 83.85. A decisive break above this level could pave the way to the 84.00 psychological level.
Sustained trading below the uptrend line around 83.72 could see further downside towards 83.51, a low of July 12. Any follow-through selling will expose 83.44, the 100-day EMA.
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 Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.26% | 0.46% | 0.44% | 1.72% | -2.18% | 0.68% | -1.08% | |
| EUR | -0.25% | 0.20% | 0.19% | 1.47% | -2.43% | 0.43% | -1.36% | |
| GBP | -0.46% | -0.21% | -0.02% | 1.27% | -2.63% | 0.25% | -1.56% | |
| CAD | -0.45% | -0.19% | 0.01% | 1.27% | -2.63% | 0.25% | -1.55% | |
| AUD | -1.75% | -1.47% | -1.28% | -1.31% | -3.93% | -1.05% | -2.85% | |
| JPY | 2.12% | 2.33% | 2.55% | 2.55% | 3.79% | 2.79% | 1.06% | |
| NZD | -0.69% | -0.43% | -0.24% | -0.24% | 1.03% | -2.86% | -1.80% | |
| CHF | 1.08% | 1.34% | 1.54% | 1.53% | 2.77% | -1.06% | 1.76% |
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
USD/JPY recovers toward 153.00 ahead of BoJ policy announcement
USD/JPY is recovering toward 153.00, as traders await the key BoJ policy decision. The markets have been discounting a greater chance of a rate hike, which underpins the JPY and acts as a headwind for the currency pair.
AUD/USD breaches 0.6500 to hit three-month lows after Australian CPI data
AUD/USD has come under intense selling pressure, hitting fresh three-month lows below 0.6500 after softer RBA Trimmed Mean CPI inflation, which reinforced RBA rate cut bets. The Aussie ignores upbeat Australian Retail Sales and Chinese PMIs. Fed is next in focus.
Gold price bulls turn cautious ahead of the crucial FOMC policy decision
Gold price struggles to capitalize on the previous day’s breakout momentum beyond $2,400. Geopolitical risks, modest USD downtick and global economic woes lend support to the metal. Traders keenly await the BoJ decision for a short-term impetus ahead of the Fed policy update.
Ethereum price dynamics combined with Q2 insights suggest ETH has potential for another rally in current cycle
Ethereum is down 1.5% on Tuesday despite several market participants acknowledging its ninth anniversary. Meanwhile, Glassnode shared key ETH Q2 insights that may prove beneficial as the market takes shape in Q3.
Fed meeting – What to expect
The second day Fed meeting begins today. Here's a look at how has the US economy changed since the June Fed meeting? Does it justify a greenlight for September interest rate cut by the Federal Reserve?