- Indian Rupee trades on a flat note in Monday’s Asian session.
- The combination of lower crude oil prices, strong foreign inflows and firmer Fed rate bets underpins the INR.
- Investors await the Indian Trade Balance and US NY Empire State Manufacturing Index, which are due on Monday.
The Indian Rupee (INR) flat lines on Monday despite a weaker US Dollar (USD). The decline in crude oil prices, strong foreign institutional inflows (FII) into the Indian stock market and the odds of an outsized Federal Reserve (Fed) rate cut at its upcoming monetary policy meeting on Wednesday might support the INR.
However, the consistent USD buying by importers and risk aversion ahead of the key event could boost the Greenback. Looking ahead, the Indian Trade Balance and US NY Empire State Manufacturing Index are due on Monday. The Indian Wholesale Price Index (WPI) Inflation and US Retail Sales for August will be released on Tuesday. The US Federal Reserve (Fed) interest rate decision will be the highlight on Wednesday.
Daily Digest Market Movers: Indian Rupee remains flat despite softer USD, lower crude oil prices
- On Friday, the BSE Sensex closed lower by 72 points, down 0.1%, while the NSE Nifty stood lower by 32 points, down 0.1%. Bajaj Finserv, Axis Bank and Wipro were among the top gainers.
- “The US dollar index has fallen from a level of 106 to around 101 in the past three months. Simultaneously, Asian currencies have appreciated against the greenback. The likely interest rate cuts by the US Fed, a sharp drop in crude oil prices and consistent foreign institutional inflows into Indian stock markets are supportive factors for the rupee. However, the local currency has not appreciated; rather, it remains weak against the US dollar,” said Amit Pabari, MD, CR Forex Advisors.
- The Reserve Bank of India Governor Shaktikanta Das said the country’s expected growth rate over the next few years stood at 7.5%, with upside possibilities.
- University of Michigan Consumer Sentiment Index climbed to 69.0 in September from 67.9 in August, better than the estimation of 68.0.
- The markets are now pricing in a 48% possibility of a 25 basis points (bps) US rate cut on September 17-18, while the chance of a 50 bps cut stands at 52%, according to the CME FedWatch tool.
Technical Analysis: USD/INR’s constructive outlook remains in place
The Indian Rupee trades flat on the day. The USD/INR pair has broken below an ascending triangle on the daily chart. Nonetheless, in the long term, the pair keeps the bullish vibe as it remains above the key 100-day Exponential Moving Average (EMA). Further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, indicating the neutral momentum of the pair.
Sustained upside pressure past the 84.00-84.05 region, the confluence of the psychological figure, the upper boundary of the triangle and the high of September 11 could take USD/INR up to the next upside barriers at 84.50.
On the flip side, the initial support level emerges at 83.84, the low of August 30. A break below this level could pave the way to the 100-day EMA at 83.68.
RBI FAQs
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.
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.
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.
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
AUD/USD advances due to rising odds of an aggressive rate cut by the Fed
The Australian Dollar inches higher against the US Dollar on Monday. The AUD/USD pair may appreciate further due to growing speculation that the US Federal Reserve will opt for a jumbo 50 basis points rate cut at this week’s monetary policy meeting.
USD/JPY seems vulnerable near YTD low, around mid-140.00s ahead of Fed/BoJ meetings this week
The USD/JPY pair remains depressed around mid-140.00s during the Asian session on Monday, amid thin trading volumes on the back of a holiday in Japan. However, bearish traders might prefer to wait for this week's key central bank event risks before positioning for any further depreciating move.
Gold price stands tall near record high ahead of the key FOMC meeting this week
Gold price trades with a mild positive bias near the all-time peak touched on Friday. Rising bets for a 50 bps Fed rate cut later this month continue to act as a tailwind. Bulls now await this week’s key central bank event risks before placing fresh bets.
Week ahead: Key central banks in focus
This week will be an interesting one for the financial markets. In addition to several tier-1 data, the focus will be on the US Federal Reserve, closely shadowed by the Bank of England and the Bank of Japan.
European crypto fund founder calls Tether $118 billion scam
Founder of Cyber Capital, Europe’s oldest crypto fund, criticized Tether for their reserves and said there has been no audit since 2021. In a tweet thread on X, Justin Bons supports his stance on the stablecoin firm with statistics.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.