- The Indian Rupee loses traction in Friday’s Asian session.
- Higher crude oil prices and persistent local US Dollar (USD) demand weigh on the INR.
- Investors await the US June employment data on Friday for fresh impetus.
The Indian Rupee (INR) weakens on Friday amid elevated crude oil prices and local US Dollar (USD) demand. Pressure on the Japanese Yen and Chinese Yuan had put Asian peers on the defensive in previous trading sessions, but the recent discouraging US economic data helped to alleviate the INR’s depreciation.
Market players will closely monitor the US June employment data on Friday, including Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings. These figures might offer some hints about the Federal Reserve’s (Fed) policy rates trajectory. In the case of the weaker-than-expected reading, this could fuel the Fed rate cut expectation, which exerts some selling pressure on the Greenback.
Daily Digest Market Movers: Indian Rupee remains vulnerable amid global headwinds
- The outlook for India’s stock market performance in the coming decade is bright, buoyed by optimism about the country’s economic prospects after last month’s general election results, according to analysts citing WSJ.
- India’s statistics ministry last week raised its GDP growth forecast to 7.6% in its second revised estimate, up from 7.3% in the first advance forecast.
- The Fed officials emphasized the data-dependent approach and refrained from committing to interest rate cuts until further observation. Several policymakers stated that it’s necessary to hike again if inflation were to rebound, according to the Minutes of the FOMC meeting on June 11-12.
- Traders are now pricing in nearly 70% odds for a 25 basis points (bps) Fed rate cut in September, up from 58.2% last Friday, according to the CME FedWatch Tool.
- The US Nonfarm Payrolls is expected to show 190K jobs added in June, below the previous reading of 272K. The Unemployment Rate is projected to remain unchanged at 4%. Finally, the Average Hourly Earnings are forecast to drop to 3.9% YoY in June from 4.1% in May.
Technical analysis: USD/INR remains confined in a familiar range in the near term
The Indian Rupee trades on a weaker note on the day. The USD/INR pair keeps the bullish vibe on the daily timeframe as it holds above the key 100-day Exponential Moving Average (EMA).
However, in the near term, USD/INR has oscillated within the familiar trading range for a couple of months already. The 14-day Relative Strength Index (RSI) hovers around the 50-midline, suggesting that further consolidation is in play.
If USD strength picks up, the first bullish target will emerge at 83.65, a high of June 26. Sustained upside momentum could lift the pair up to the all-time high of 83.75 en route to the 84.00 psychological mark.
On the other hand, the initial support level for USD/INR is seen at 83.35, the 100-day EMA. Any follow-through selling could drag the pair back down to the 83.00 round figure, followed by 82.82, a low of January 12.
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 | -1.04% | -0.97% | -0.67% | -1.24% | 0.04% | -0.57% | 0.01% | |
| EUR | 1.03% | 0.08% | 0.36% | -0.20% | 1.07% | 0.46% | 1.05% | |
| GBP | 0.95% | -0.08% | 0.30% | -0.28% | 0.99% | 0.39% | 0.97% | |
| CAD | 0.66% | -0.37% | -0.30% | -0.57% | 0.70% | 0.10% | 0.68% | |
| AUD | 1.22% | 0.20% | 0.27% | 0.57% | 1.27% | 0.67% | 1.24% | |
| JPY | -0.04% | -1.07% | -1.00% | -0.70% | -1.28% | -0.61% | -0.02% | |
| NZD | 0.56% | -0.47% | -0.40% | -0.10% | -0.67% | 0.60% | 0.58% | |
| CHF | 0.01% | -1.06% | -0.98% | -0.67% | -1.25% | 0.03% | -0.57% |
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).
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.
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