USD/INR extends its upside following Indian Services PMI data
|- Indian Rupee (INR) trades on a softer note on the modest US Dollar demand.
- Indian S&P Global Services PMI dropped to 60.6 in February from 61.8 in January, below the market consensus of 62.0.
- Investors await the Indian S&P Global Services PMI and the US ISM Services PMI for February on Tuesday.
Indian Rupee (INR) edges lower on Tuesday amid the modest rebound of the US Dollar (USD). India's Services PMI data came in weaker than market expectations and indicated a slowdown in the services sector in February. The moderation in growth is attributable to softer expansions in business activity, sales, and jobs. The Indian Rupee attracts some sellers following the downbeat Indian PMI data and creates a tailwind for the USD/INR pair.
Nonetheless, India’s GDP grew at its fastest pace in 18 months, expanding 8.4% over a year earlier in the October-December quarter. Furthermore, most high-frequency indicators continued to improve, indicating strong economic activity. S&P Global Ratings Global Chief Economist, Paul Gruenwald said that global economic growth is likely to surprise on the upside and hence he sees only modest headwinds for India next fiscal. The positive outlook of the Indian economy might boost the INR and cap the downside of the pair.
Market players will keep an eye on the US ISM Services PMI for February, due on Tuesday. Later this week, the attention will be on the Fed's Chair Jerome Powell testifying on Wednesday ahead of the US labor market data, including Nonfarm Payrolls (NFP), Average Hourly Earning, and Unemployment Rate on Friday.
Daily Digest Market Movers: Indian Rupee weakens amid the uncertainties
- The recent HSBC Services PMI data showed the second-weakest cost pressures in the sector since August 2020 and the slowest pace increase in selling charges for two years.
- India's GDP growth is projected to grow 6.8% for the 2024 calendar year from 6.1% earlier, according to the global rating agency Moody's.
- The Reserve Bank of India (RBI) is expected to take delivery of a $5 billion FX swap due next week, owing to adequate dollar inflows and rupee liquidity staying on the tighter side.
- India's foreign exchange reserves rose by $2.975 billion to $619.072 billion for the week ending on February 23, according to the RBI.
- Fed President Raphael Bostic said on Monday that the central bank is under no urgent pressure to cut interest rates given a "prospering" economy and job market.
Most recent article: Stock Market Today: Nifty and Sensex fall further after dismal Indian PMI data
Technical Analysis: Indian Rupee inches lower within a longer-term band of 82.65-83.15
Indian Rupee trades weaker on the day. USD/INR remains confined within a multi-month-old descending trend channel between 82.65 and 83.15 since December 8, 2023.
USD/INR keeps the bearish vibe unchanged in the near term as the pair holds below the 100-day Exponential Moving Average on the daily timeframe. Additionally, the 14-day Relative Strength Index (RSI) lies in the bearish territory below the 50.0 midlines, suggesting that further decline looks favorable.
The first downside target will emerge at the lower limit of the descending trend channel at 82.65. Any follow-through selling will see a drop to a low of August 23, and finally a low of June 1 at 82.25.
On the upside, the key resistance level is located at 83.00, representing the 100-day EMA and a psychological round figure. A decisive break above the latter will see a rally to a high of January 2 at 83.35, en route to 84.00.
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 | 0.06% | 0.10% | 0.16% | 0.40% | 0.02% | 0.32% | 0.06% | |
| EUR | -0.07% | 0.04% | 0.10% | 0.32% | -0.04% | 0.23% | 0.02% | |
| GBP | -0.09% | -0.04% | 0.06% | 0.27% | -0.07% | 0.22% | -0.02% | |
| CAD | -0.16% | -0.09% | -0.05% | 0.21% | -0.14% | 0.13% | -0.08% | |
| AUD | -0.41% | -0.33% | -0.28% | -0.22% | -0.37% | -0.08% | -0.30% | |
| JPY | -0.02% | 0.06% | 0.06% | 0.15% | 0.35% | 0.30% | 0.06% | |
| NZD | -0.33% | -0.23% | -0.23% | -0.16% | 0.09% | -0.31% | -0.21% | |
| CHF | -0.06% | -0.01% | 0.02% | 0.10% | 0.34% | -0.06% | 0.26% |
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 economy FAQs
How does the Indian economy impact the Indian Rupee?
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
What is the impact of Oil prices on the Rupee?
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
How does inflation in India impact the Rupee?
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
How does seasonal US Dollar demand from importers and banks impact the Rupee?
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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