- Indian Rupee trades on a negative note on Thursday.
- The INR’s downside might be capped, owing to a further decline in crude oil prices.
- Market players will closely monitor the US preliminary GDP growth number for the first quarter (Q1).
Indian Rupee (INR) extends its downside on Thursday despite the decline of the US Dollar (USD). The growing speculation that the US Federal Reserve (Fed) will delay interest rate cuts boosts the Greenback against its rivals. Nonetheless, the upside of the pair might be limited due to a further decline in crude oil prices amid easing tensions about a wider fallout between Iran and Israel.
Investors will closely monitor the US preliminary Gross Domestic Product (GDP) Annualized for the first quarter (Q1). The report could offer a clue of how strongly the US economy is growing and point to the Fed's next move. On Friday, the final reading of the US March Personal Consumption Expenditures Price Index (PCE) will be a closely watched event. Apart from this, India’s general election, which started on 19 April and will run until 1 June, will be in the spotlight.
Daily Digest Market Movers: The Indian Rupee remains vulnerable at the start of the election
- In mid-April, India’s foreign exchange reserves stood at USD 564.5 billion (+48 billion over a year), equating to more than 7.6 months of goods and services imports.
- The Indian rupee remains stable at the start of the election period, holding up better than other Asian currencies so far. Since the start of April, it has only depreciated by 0.6% against the US Dollar.
- The Indian economy needs to grow at a rate of 8–10% per annum over the next decade to reap the demographic dividend, according to the Reserve Bank of India (RBI) monthly bulletin.
- The main economic challenge for the Indian government after the election is unemployment, according to economists polled by Reuters, who forecast India to expand at a solid 6.5% this fiscal year.
- The US Durable Goods Orders improved 2.6% MoM or $7.3 billion, to $283.4 billion in March, compared to the 0.7% increase (revised from 1.4%) in February. The increase in overall orders was the biggest since November 2023
- Durable Goods Orders ex Transportation rose by 0.2% MoM in March, while new orders excluding defense rose 2.3% MoM in the same period. Both figures came in below the consensus.
Technical analysis: USD/INR keeps the bullish stance in the longer term
The Indian Rupee trades on a softer note on the day. USD/INR maintains the positive outlook unchanged on the daily timeframe as the pair is above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) hovers around the 50.00 midlines, suggesting that further consolidation is favorable for the time being.
The first upside barrier for USD/INR will emerge at 83.50 (high of April 15). Any follow-through buying above this level will expose 83.72 (an all-time high), en route to 84.00 (round figure). On the other hand, the confluence of the 100-day EMA and a low of April 10 near the 83.10–83.15 zone. The additional downside filter to watch is 82.78 (low of January 15), followed by 82.65 (low of March 16).
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.65% | -0.97% | -0.41% | -1.46% | 0.66% | -0.87% | 0.20% | |
| EUR | 0.63% | -0.32% | 0.22% | -0.80% | 1.28% | -0.22% | 0.86% | |
| GBP | 0.96% | 0.34% | 0.53% | -0.47% | 1.62% | 0.09% | 1.17% | |
| CAD | 0.41% | -0.24% | -0.54% | -1.04% | 1.07% | -0.45% | 0.61% | |
| AUD | 1.44% | 0.80% | 0.49% | 1.01% | 2.06% | 0.58% | 1.65% | |
| JPY | -0.67% | -1.29% | -1.62% | -1.08% | -2.13% | -1.54% | -0.46% | |
| NZD | 0.87% | 0.24% | -0.10% | 0.45% | -0.56% | 1.51% | 1.09% | |
| CHF | -0.21% | -0.86% | -1.17% | -0.62% | -1.67% | 0.46% | -1.07% |
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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