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  • Indian Rupee trades on a stronger note amid US Dollar weakness. 
  • OECD revised India’s growth outlook higher for 2024–25 (FY25) to 6.2% from the 6.1% forecast earlier in its November outlook.
  • Investors will tune in to the Fed speeches and the Reserve Bank of India (RBI) rate decision this week.

Indian Rupee (INR) snaps a three-day losing streak on Wednesday on the corrective move in the US Dollar (USD) and a downtick in US Treasury yields. On Monday, the Organization for Economic Co-operation and Development (OECD) raised India’s growth outlook for 2024–25 (FY25) to 6.2% from the 6.1% estimated earlier in its November outlook. Nonetheless, OECD warned that the geopolitical tensions in the Middle East posed a threat to the global economy as disruptions in Red Sea shipping may boost consumer prices.

In the absence of top-tier economic data releases from the US, traders will take more cues about the interest rate path from Fedspeak throughout the week. The Reserve Bank of India (RBI) has scheduled the monetary policy meeting for Tuesday to Thursday. On Thursday, RBI Governor Shaktikanta Das will announce the MPC decision at 4.30 GMT. 

Daily Digest Market Movers: Indian Rupee stays vulnerable ahead of RBI rate decision

  • Foreign investors have purchased $936 million in Indian bonds in February, in addition to $275 million in inflows into local equities.
  • The Indian rupee has risen 0.2% versus the US Dollar since the beginning of the year, as decreasing expectations for an early rate cut by the Fed bolstered the USD. 
  • The RBI is anticipated to keep the repo rate steady at 6.5% in the policy decision, which will be announced on Thursday. 
  • Fed Bank of Cleveland President Loretta Mester said that she might open the door to lower interest rates later this year if the economy evolves as expected. 
  • Minneapolis Fed President Neel Kashkari stated that the central bank has not yet reached the goal on year-over-year inflation data, but 3-month and 6-month data is basically there.
  • Traders have now priced in 15% odds of rate cuts in the March meeting, according to the CME’s FedWatch Tool. 

Technical Analysis: Indian Rupee remains confined in longer-term range of 82.70–83.20

Indian Rupee edges higher on the day. The USD/INR pair has traded within a two-month-old descending trend channel of 82.70–83.20. 

In the near term, USD/INR keeps the bearish vibe unchanged as the pair remains capped below the key 100-period Exponential Moving Average (EMA) on the daily chart. Furthermore, the 14-day Relative Strength Index (RSI) lies below the 50.0 midline, hinting that further decline cannot be ruled out. 

If the bear sustains its momentum, the lower limit of the descending trend channel at 82.70 will attract some sellers. The next potential support level will emerge at a low of August 23 at 82.45, en route to a low of June 1 at 82.25. 

On the bright side, the crucial resistance level for USD/INR is located at the confluence of the upper boundary of the descending trend channel and a high of January 18 at 83.20. Any follow-through buying will see a rally to the next upside targets near a high of January 2 at 83.35, and then the 84.00 psychological level. 

US Dollar price today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the New Zealand Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.03% 0.02% -0.04% -0.05% 0.04% -0.06% 0.00%
EUR 0.01%   0.04% -0.01% -0.02% 0.07% -0.05% 0.02%
GBP -0.02% -0.05%   -0.06% -0.06% 0.04% -0.09% 0.00%
CAD 0.05% 0.01% 0.06%   0.00% 0.08% -0.02% 0.01%
AUD 0.05% 0.02% 0.06% 0.01%   0.09% -0.02% 0.05%
JPY -0.05% -0.06% 0.00% -0.10% -0.07%   -0.11% -0.07%
NZD 0.07% 0.04% 0.09% 0.03% 0.02% 0.11%   0.07%
CHF 0.00% -0.03% 0.02% -0.04% -0.02% 0.05% -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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