USD/INR extends gains ahead of Fed Powell’s speech
- Indian Rupee loses traction on Friday on the softer USD, and lower US bond yields.
- The positive outlook in the Indian economy might boost the INR and cap the pair’s upside.
- Investors await Fed Chair Jerome Powell’s speech on Friday for fresh impetus.
Indian Rupee (INR) weakens on Friday amid the rise of the US dollar (USD) and higher US Treasury bond yields. According to the HSBC Flash India PMI, India's business activity ended the fiscal year on a good note, expanding at its fastest pace in eight months in March. This improvement in data suggests India is likely to continue its position as the fastest-growing major economy, which might boost the INR and cap the upside of the pair.
Investors will take more cues from Fed Chair Jerome Powell’s speech on Friday. Next week, attention will shift to the US Gross Domestic Product Annualized (GDP) for the fourth quarter (Q4), which is forecast to remain steady at 3.2%.
Daily Digest Market Movers: Indian Rupee remains vulnerable amid the uncertainties
- India's Flash HSBC Manufacturing Purchasing Managers' Index (PMI) came in at 59.2 versus 56.9 prior. The Services PMI arrived at 60.3 in March, versus 60.6 in the previous reading.
- The US S&P Global Manufacturing PMI rose to 52.5 in March from 52.2 in February, above the estimation of 51.7. The Services PMI eased to 51.7 in March from the previous reading of 52.3. The Composite PMI arrived at 52.2 in March versus 52.5 prior.
- The US weekly Initial Jobless Claims for the week ending March 15 dropped 2,000 to 210K from 212K in the previous week.
- The Fed held the rate steady at 5.25–5.50% at its March meeting on Wednesday, with the median dot plot for 2024 unchanged from the 75 basis points (bps) of cuts shown in the December projections.
- Fed chair Jerome Powell said on Wednesday that the upside surprises on US inflation data in January and February haven't changed the overall story that inflation is heading down gradually, on a somewhat bumpy road.
Technical Analysis: Indian Rupee will resume its bearish trend on a daily close above a longer-term range
Indian Rupee trades weaker on the day. USD/INR breaks above a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023. A daily close above the latter will confirm the positive outlook of the pair in the long term.
In the near term, USD/INR keeps the bullish vibe unchanged as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, the overbought RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.
The immediate resistance level will emerge near a high of January 2 at 83.35. Further north, the pair might attract some buyers to an all-time high of 83.49, followed by the 84.00 psychological level. On the downside, the key contention level is located near the 100-day EMA and round figure of the 83.00 mark. The additional downside filter to watch is a low of March 14 at 82.80, en route to the lower limit of the descending trend channel at 82.60.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF |
| USD | 0.22% | 0.19% | 0.24% | 0.58% | 0.00% | 0.50% | 0.19% |
| EUR | -0.22% | -0.03% | 0.04% | 0.35% | -0.22% | 0.27% | -0.03% |
| GBP | -0.19% | 0.03% | 0.07% | 0.39% | -0.19% | 0.32% | 0.00% |
| CAD | -0.25% | -0.03% | -0.05% | 0.35% | -0.25% | 0.25% | -0.05% |
| AUD | -0.58% | -0.37% | -0.41% | -0.34% | -0.58% | -0.08% | -0.40% |
| JPY | 0.00% | 0.22% | 0.19% | 0.26% | 0.56% | 0.49% | 0.19% |
| NZD | -0.51% | -0.28% | -0.33% | -0.25% | 0.08% | -0.50% | -0.32% |
| CHF | -0.19% | 0.04% | 0.01% | 0.07% | 0.40% | -0.19% | 0.31% |
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.
Reprinted from FXStreet，the copyright all reserved by the original author.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.
FOLLOWME Trading Community Website: https://www.followme.com
Hot
No comment on record. Start new comment.