- Indian Rupee holds positive ground despite the sour market mood.
- Rising oil prices and Middle East geopolitical concerns might trigger risk-off sentiment and limit the Indian Rupee's upside.
- Market players await the US S&P Global PMI data on Tuesday; India’s markets are closed for the Dussehra holidays.
Indian Rupee (INR) trades strongly against the US Dollar (USD) amid a decline in US Treasury bond yields on Tuesday. Moreover, the Reserve Bank of India's (RBI) potential aggressive intervention last week lends some support to the Indian Rupee and acts as a headwind for the USD/INR pair. Nonetheless, the higher crude oil prices and escalating geopolitical tension in the Middle East might contribute to the risk-off mood and cap the upside of the Indian Rupee.
India’s markets are closed on Tuesday on account of the Dussehra holidays. Traders will monitor India's Balance of Payments for the second quarter (Q2) on Thursday. Fed officials will not deliver any speeches this week due to the blackout period ahead of the FOMC meeting next week. In the meantime, traders will take cues from the US S&P Global PMI, the preliminary estimate of the US Q3 Gross Domestic Product (GDP), and the Core Personal Consumption Expenditure Index due later this week.
Daily Digest Market Movers: Indian Rupee soars, the Dollar corrects to one-month lows
- The Chicago Fed National Activity Index rose to +0.02 in September versus -0.22 prior, suggesting the US economy is still some distance from a recession.
- RBI's monetary policy committee stated the central bank would continue to focus on maintaining inflation at the target of 4%.
- MPC member Varma stated that a 1% real interest rate, adjusted for inflation, would consistently achieve India's inflation target.
- Net foreign direct investment (FDI) in India fell to $2.99B in April–August this year from $18.03B last year, reflecting a slowing in global activity and a rise in repatriation.
- RBI Chief Shaktikanta Das said the central bank does intervene in the FX market, but only to prevent excessive volatility in the INR.
- Chief Das stated that RBI will monitor the evolving inflation dynamic amid the uncertainty surrounding food inflation.
- India's Finance Minister will closely monitor the supply chain impact of the ongoing tensions in the Middle East.
- The RBI's October bulletin suggested growth in India is expected to gain momentum for the remainder of the year.
- RBI sold a net total of $3.86B in the spot foreign exchange market in August, as per their monthly bulletin.
- India’s Wholesale Price Index (WPI) arrived at -0.26% YoY in September from 0.52% in August, below the market consensus of 0.50%.
Technical Analysis: Indian Rupee gains momentum above the key support level of 83.00
The Indian Rupee extends its upside against the USD. The USD/INR pair remains well supported above the 83.00 psychological mark despite breaking the low of a prior range. A break below the 83.00 would drag the pair to 82.82 (low of September 12), en route to 82.65 (low of August 4). On the other hand, the immediate upside barrier is the support-turned-resistance at 83.15, followed by a high of October 4 at 83.30, and the all-time high around 83.45. In the meantime, the pair holds above the key 200-day Exponential Moving Average (EMA) on the daily chart, which supports further upside for the USD/INR pair in the short term.
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 weakest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.22% | -0.57% | 0.39% | -0.48% | 0.01% | 0.61% | -1.17% | |
| EUR | 1.21% | 0.65% | 1.58% | 0.72% | 1.19% | 1.79% | 0.06% | |
| GBP | 0.55% | -0.65% | 0.94% | 0.08% | 0.55% | 1.15% | -0.59% | |
| CAD | -0.39% | -1.60% | -0.96% | -0.86% | -0.39% | 0.21% | -1.55% | |
| AUD | 0.48% | -0.74% | -0.08% | 0.86% | 0.47% | 1.07% | -0.69% | |
| JPY | -0.01% | -1.24% | -0.56% | 0.38% | -0.48% | 0.60% | -1.18% | |
| NZD | -0.60% | -1.83% | -1.16% | -0.21% | -1.08% | -0.59% | -1.78% | |
| CHF | 1.13% | -0.06% | 0.59% | 1.53% | 0.67% | 1.14% | 1.73% |
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
What are the key factors driving the Indian Rupee?
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.
How do the decisions of the Reserve Bank of India impact the Indian 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.
What macroeconomic factors influence the value of the Indian Rupee?
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.
How does inflation impact the Indian 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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