USD/INR extends its downside, all eyes on US NFP data
- Indian Rupee drifts higher on Friday amid the softer Greenback.
- The positive outlook in the Indian economy and capital inflows support the INR.
- Investors await the US ISM Services PMI and the employment data on Friday.
Indian Rupee (INR) gains momentum on Friday as the cautious comments by the Federal Reserve (Fed) Chair Jerome Powell exert further selling pressure on the US Dollar (USD). Furthermore, the positive sentiment in the Indian equity markets and the inflow of foreign capital boost the INR and cap the pair’s upside.
Market players will keep an eye on the US ISM Services PMI and the employment data for April, due on Friday. The Nonfarm Payrolls (NFP) is estimated to show 243K job additions in the US economy, while the Unemployment Rate is projected to remain steady at 3.8% in April. The unexpected weakening in the labor market could warrant a rate cut from the Fed, which weighs on the Greenback.
Daily Digest Market Movers: Indian Rupee remains strong amid the positive sentiment
- The HSBC final India Manufacturing Purchasing Managers' Index (PMI) declined to 58.8 in April from a 16-year high of 59.1 in March.
- FX intervention from the RBI in February was the lowest in six months, about one-eighth of the average monthly intervention from October to December, per Reuters.
- QuantEco Research economist, Vivek Kumar, said that pressures on the Indian Rupee eased in the January-March compared to October-December, reducing the magnitude of intervention.
- The Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for India by 40 basis points (bps) to 6.6% for 2024-25.
- The Initial Jobless Claims in the US for the week ended April 27 remained unchanged at 208K, better than the expectation of 212K.
- The US Fed left interest rates unchanged on Wednesday and noted that it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are easing sustainably to its 2% target.
Technical analysis: USD/INR keeps the bullish outlook in the longer term
The Indian Rupee trades weaker on the day. The constructive stance of USD/INR remains unchanged on the daily timeframe as the pair is forming an ascending triangle and holds above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) holds in the bullish territory around the 50 midline, indicating that further consolidation looks favorable for the time being.
The confluence of the lower limit of the ascending triangle and the 100-day EMA at 83.15 act as an initial support level for USD/INR. A decisive break below this level will expose a low of January 15 at 82.78 and then pave the way to a low of March 11 at 82.65. On the upside, a high of May 1 at 83.50 will be the first upside target for the pair. A bullish breakout above the upper boundary of the ascending triangle of 83.71 will see a rally to the 84.00 psychological round mark.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | -0.04% | 0.03% | -0.02% | 0.15% | -0.01% | -0.15% | |
| EUR | 0.00% | -0.03% | 0.02% | -0.01% | 0.17% | 0.01% | -0.16% | |
| GBP | 0.03% | 0.04% | 0.07% | 0.02% | 0.18% | 0.03% | -0.11% | |
| CAD | -0.02% | -0.02% | -0.05% | -0.03% | 0.17% | -0.03% | -0.17% | |
| AUD | 0.01% | 0.01% | -0.02% | 0.03% | 0.19% | -0.01% | -0.14% | |
| JPY | -0.15% | -0.18% | -0.20% | -0.16% | -0.17% | -0.16% | -0.33% | |
| NZD | 0.01% | -0.01% | -0.02% | 0.04% | 0.00% | 0.19% | -0.14% | |
| CHF | 0.16% | 0.17% | 0.12% | 0.17% | 0.14% | 0.34% | 0.13% |
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.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
