- Indian Rupee loses traction on Friday due to 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 likely 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 | 0.25% | 0.18% | 0.21% | 0.64% | -0.14% | 0.51% | 0.08% | |
| EUR | -0.25% | -0.07% | -0.03% | 0.39% | -0.40% | 0.26% | -0.17% | |
| GBP | -0.18% | 0.08% | 0.05% | 0.47% | -0.32% | 0.35% | -0.10% | |
| CAD | -0.22% | 0.02% | -0.03% | 0.44% | -0.36% | 0.29% | -0.13% | |
| AUD | -0.64% | -0.40% | -0.48% | -0.44% | -0.79% | -0.13% | -0.57% | |
| JPY | 0.15% | 0.39% | 0.31% | 0.37% | 0.75% | 0.65% | 0.22% | |
| NZD | -0.52% | -0.26% | -0.35% | -0.29% | 0.13% | -0.66% | -0.44% | |
| CHF | -0.08% | 0.17% | 0.10% | 0.14% | 0.56% | -0.22% | 0.43% |
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
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.
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.
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.
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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