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USD/INR loses momentum, investors await US PMI data

  • Indian Rupee recovers some lost ground on the softer US Dollar. 
  • Indian HSBC Manufacturing PMI improved to 59.2 vs. 56.9 prior; Services PMI eased to 60.3 vs. 60.6 previously.
  • Market players await the Indian HSBC PMI and US S&P Global PMI data on Thursday. 

Indian Rupee (INR) trades on a stronger note on Thursday amid the decline of the US Dollar (USD). India's manufacturing activity continued to improve in March, with the HSBC Manufacturing Purchasing Managers' Index (PMI) coming in at 59.2 from the previous reading of 56.9. The Services PMI eased to 60.3 in March from 60.6 in the previous reading. The INR remains firm after the mixed Indian PMI data. 

Furthermore, the dovish comments from Fed Chair Jerome Powell during the press conference have exerted some selling pressure on the Greenback and created a headwind for the USD/INR pair. Moving on, traders will keep an eye on the preliminary S&P Global PMI for March, the weekly Initial Jobless Claims, and Existing Home Sales, due later on Thursday. 

Daily Digest Market Movers: Indian Rupee stays firm amid global influences

  • Krishnamurthy Venkata Subramanian, India's executive director at the International Monetary Fund (IMF), stated on Wednesday that India needs to grow at 8% on a sustained basis to generate sufficient jobs to reduce poverty and inequality.
  • The Reserve Bank of India (RBI) has projected GDP growth for the next financial year at 7%, based on improved household consumption and an upturn in the private capex cycle.
  • 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 noted during the press conference that strong labour market data wouldn’t deter the central bank from cutting rates. The Fed will wait for more evidence that inflation is sustainably moderating toward its 2% target.
  • Investors have priced in a 75% odds that the Fed will start cutting the rate in the June meeting, according to the CME FedWatch Tool. 

Technical Analysis: Indian Rupee remains capped within a long-term band

Indian Rupee trades strongly on the day. USD/INR faces rejection near the upper boundary of the descending trend channel and remains stuck within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023. 

In the near term, the bullish outlook of USD/INR remains intact as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is confirmed by the 14-day Relative Strength Index (RSI), which lies above the 50.0 midline, suggesting that further upside looks favorable. 

The key upside barrier for the pair will emerge near the upper boundary of the descending trend channel at 83.15. A bullish breakout above this level could draw in USD/INR bulls and push the pair back to a high of January 2 at 83.35, followed by the 84.00 psychological level.

On the flip side, the first downside target is seen at the resistance-turned-support level at the 83.00 mark. Any follow-through selling below 83.00 could extend its downswing to a low of March 14 at 82.80. Further south, the next contention level is located at the lower limit of the descending trend channel at 82.60. A breach of this level might drag USD/INR to a low of August 23 at 82.45.

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 Australian Dollar.

 USDEURGBPCADAUDJPYNZDCHF
USD 0.00%0.03%-0.08%-0.49%0.12%-0.14%-0.05%
EUR-0.01% 0.02%-0.08%-0.51%0.09%-0.14%-0.06%
GBP-0.03%-0.03% -0.11%-0.52%0.07%-0.15%-0.09%
CAD0.07%0.09%0.11% -0.42%0.17%-0.06%0.01%
AUD0.49%0.49%0.51%0.41% 0.58%0.35%0.43%
JPY-0.10%-0.10%-0.08%-0.21%-0.58% -0.23%-0.17%
NZD0.13%0.13%0.15%0.06%-0.37%0.24% 0.07%
CHF0.06%0.05%0.08%-0.03%-0.44%0.17%-0.09% 

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 Rupee FAQs

The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.

Author

Lallalit Srijandorn

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.

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