- The Indian Rupee trades steady in Monday’s Asian session.
- RBI’s intervention and lower crude oil prices might underpin INR; foreign outflows and strong USD demand might limit its upside.
- The first reading of HSBC India PMI will be released on Wednesday ahead of Fed Chair Powell's speech.
The Indian Rupee (INR) flatlines on Monday despite the softer US Dollar (USD). India’s foreign outflows and strong USD demand from importers remain exerting some selling pressure on the INR. Despite multiple headwinds, the local currency is supported by the Reserve Bank of India (RBI’s) intervention, which is likely to sell USD to stabilize and prevent the INR from a breach of the crucial 84.00 level.
Furthermore, the decline of crude oil prices is likely to support the INR as India remains one of the top importers of crude oil. The preliminary HSBC India Purchasing Managers Index (PMI) will be published on Wednesday. On the US docket, the Federal Reserve (Fed) Chair Jerome Powell's speech will be in the spotlight this Friday as traders will take more cues about potential interest rate cuts. The dovish remarks from the Fed officials might drag the Greenback lower and cap the pair’s upside.
Daily Digest Market Movers: Indian Rupee faces challenges from both domestic and global factors
- India's exports were 6% lower in the current fiscal year through July compared to the same period last year. In FY24, foreign direct investment in the country fell by 3.5%. Foreign portfolio investors (FPI) have withdrawn funds from India due to the country's overheated equities market.
- Consumer sentiment rebounded in August for the first time in five months. The preliminary University of Michigan Consumer Sentiment Index came in at 67.8 in August versus 66.4 prior, better than the 66.9 estimated.
- The US Housing Starts plunged by 6.8% to an annual rate of 1.238 million in July after jumping by 1.1% to a revised rate of 1.329 million in June, the Commerce Department reported on Friday. Building Permits decreased by 4.0% to an annual rate of 1.396 million in July after surging by 3.9% to a revised rate of 1.454 million in June.
- Federal Reserve Bank of Chicago President Austan Goolsbee said on Sunday that the US central bank officials should be wary of keeping the restrictive policy in place longer than necessary.
- San Francisco Fed President Mary Daly called for a "prudent" approach to lowering rates while pushing back on economists’ concerns that the US economy is heading for a sharp slowdown.
Technical analysis: USD/INR’s bullish outlook prevails
Indian Rupee trades flat on the day. According to the daily chart, the USD/INR is in a bullish phase, with the price holding above the key 100-day Exponential Moving Average (EMA) and the 11-week-old uptrend line. The 14-day Relative Strength Index (RSI) stands above the midline near 56.80, supporting a continuation of the uptrend.
A crucial resistance level for USD/INR emerges at the 84.00 psychological level. A break above the mentioned level could expose the record high of 84.24, followed by 84.50.
On the other hand, the initial target could be the uptrend line at 83.88, with potential further downside if the bearish momentum continues. A breach of this level will pave the way to the 100-day EMA at 83.55 en route to 83.36, the low of June 28.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.13% | -0.11% | -0.13% | -0.25% | -0.79% | -0.32% | -0.27% | |
| EUR | 0.13% | 0.03% | 0.02% | -0.08% | -0.63% | -0.17% | -0.10% | |
| GBP | 0.12% | -0.02% | -0.02% | -0.14% | -0.69% | -0.21% | -0.15% | |
| CAD | 0.12% | -0.01% | 0.01% | -0.09% | -0.65% | -0.19% | -0.12% | |
| AUD | 0.24% | 0.08% | 0.13% | 0.12% | -0.56% | -0.09% | -0.02% | |
| JPY | 0.79% | 0.63% | 0.67% | 0.63% | 0.56% | 0.45% | 0.52% | |
| NZD | 0.32% | 0.17% | 0.20% | 0.19% | 0.10% | -0.46% | 0.07% | |
| CHF | 0.25% | 0.10% | 0.13% | 0.12% | 0.03% | -0.52% | -0.07% |
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
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.
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.
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.
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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