- The Indian Rupee softens in Monday’s early European session.
- Substantial equity outflows could undermine the INR, but likely RBI intervention might cap its losses.
- Investors await Fedspeak on Monday for fresh impetus.
The Indian Rupee (INR) edges lower on Monday. The persistent outflows from Indian equities for a record monthly high exert some selling pressure on the local currency.
However, the decline in crude oil prices and the likely interventions by the Reserve Bank of India (RBI) through USD sales could help limit the INR’s losses in the near term. Looking ahead, Investors will monitor the Federal Reserve (Fed) Neel Kashkari and Jeffrey Schmid speeches on Monday for fresh impetus.
Daily Digest Market Movers: Indian Rupee loses ground amid outflow woes
- Foreign portfolio investors have sold a net amount of $8.4 billion so far in October, surpassing the previous record outflow of $8.35 billion set in March 2020.
- Atlanta Fed President Raphael Bostic said on Friday that he is not in a rush on rate cuts and sees the case for rate reduction in the central bank's policy rate to somewhere between 3% and 3.5% by the end of next year, per Reuters.
- According to the CME FedWatch tool, traders have priced in a nearly 92.6% chance of a 25 basis points (bps) Fed rate cut in November.
- The US Building Permits fell by 2.9% to 1.428 million in September from 1.47 million in August, missing estimates of 1.46 million.
- Housing Starts for September declined by 0.5% to 1.354 millionversus 1.361 million prior, above the consensus of 1.35 million.
Technical Analysis: USD/INR keeps the positive picture in the longer term
The Indian Rupee trades in negative territory on the day. Technically, the bullish outlook of the USD/INR pair prevails on the daily timeframe, with the price holding above the ascending trend line and the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) stands above the midline near 60.00, suggesting the further upside looks favorable.
Consistent demand above the all-time high of 84.15 could lead to a bullish upswing that could take USD/INR to 84.50, en route to the 85.00 psychological level.
On the downside, a decisive break below the rising trend line of 84.00 could revisit the previous support level at 83.71, the 100-day EMA. The next contention level to watch is 83.00, representing the round mark and the low of May 24.
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.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds solid-Aussie jobs data-led gains above 0.6400
AUD/USD holds sizeable gains above 0.6400 early Thursday, capitalizing on stellar Australian jobs data, which pointed to a still resilient labour market and forced investors to scale back their bets for a rate cut by the RBA in February.
USD/JPY extends losses to near 152.00 amid risk-aversion, US Dollar retreat
USD/JPY drifts lower to near 152.00 in Thursday's Asian trading, snapping a three-day winning streak to a two-week high.The pair remains weighed down by a broad US Dollar pullback, risk-aversion and uncertainty around the BoJ rate hike next week. Focus shifts to US data.
Gold buyers take a breather ahead of US PPI inflation data
Gold's price seems to have paused its four-day recovery stint in Asian trading on Thursday after hitting fresh five-week highs near $2,725. Traders assess the odds of US Federal Reserve (Fed) interest rate cuts next year amid the ongoing upsurge in the US Treasury bond yields across curve.
Ripple's XRP could extend its rally to $4.75 after recent consolidation, rising profit-taking poses threat
Ripple's XRP continued its rally on Wednesday as it looks to test the upper boundary of a key flag channel. Following the recent price rise, investors booked profits worth nearly $800 million while options traders bet on the remittance-based token hitting the $5 mark.
BTC faces setback from Microsoft’s rejection
Bitcoin price hovers around $98,400 on Wednesday after declining 4.47% since Monday. Microsoft shareholders rejected the proposal to add Bitcoin to the company’s balance sheet on Tuesday.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.