USD/INR jumps as US H-1B visa fees hike weighs on Indian Rupee
- The Indian Rupee declines to near 88.50 against the US Dollar following the US announcement of a one-time fee on H-1B visa applicants.
- India’s Commerce Minister Goyal is scheduled to visit Washington for trade talks on Monday.
- Fed’s Daly stated that the interest rate cut was aimed at bolstering the slowing US labor market.
The Indian Rupee (INR) trades lower against the US Dollar (USD) during late Indian trading hours on Monday. The USD/INR pair rises to near 88.50 as the announcement of the one-time hefty $1,00,000 fee on new applicants for H-1B visas by the United States (US) has raised concerns over the outlook of Indian tech companies, which are heavily reliant on business coming from Washington.
According to a report from Bloomberg, the aim of a significant overhaul of the H-1B visa program by the US economy is to create jobs for Americans. Additionally, US President Donald Trump is also planning to direct the Labor Secretary to begin a rulemaking process to revise prevailing-wage levels for the H-1B program.
Such a scenario is unfavorable for companies in nations like India that send a number of their employees to the US to smooth the functioning of business operations. The impact will be significant on Indian IT’s employee cost, which could hit their margins badly.
The outlook of the Indian Rupee has already remained weak due to ongoing trade tensions between the US and India. Washington has imposed 50% tariffs on imports from New Delhi, including a 25% penalty duty for buying Oil from Russia.
Meanwhile, India’s Commerce Minister Piyush Goyal has announced, over the weekend, that he will visit Washington on Monday for further discussions on the trade agreement. Last week, top negotiators from the US visited India for trade talks and expressed confidence in closing a deal soon.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.06% | 0.18% | 0.10% | 0.10% | 0.04% | 0.25% | |
| EUR | -0.06% | -0.10% | 0.12% | 0.02% | 0.00% | 0.03% | 0.15% | |
| GBP | 0.06% | 0.10% | 0.16% | 0.15% | 0.13% | 0.07% | 0.31% | |
| JPY | -0.18% | -0.12% | -0.16% | -0.11% | -0.12% | 1.01% | 0.04% | |
| CAD | -0.10% | -0.02% | -0.15% | 0.11% | -0.02% | 1.09% | 0.17% | |
| AUD | -0.10% | -0.00% | -0.13% | 0.12% | 0.02% | 1.17% | 0.18% | |
| INR | -0.04% | -0.03% | -0.07% | -1.01% | -1.09% | -1.17% | 0.12% | |
| CHF | -0.25% | -0.15% | -0.31% | -0.04% | -0.17% | -0.18% | -0.12% |
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 Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily digest market movers: Investors await speeches from Fed speakers
- The upside move in the Indian Rupee is also driven by strength in the US Dollar. The US currency extends its winning streak for the fourth trading day on Monday. The USD has been performing well since the monetary policy announcement by the Federal Reserve (Fed) on Wednesday, in which it reduced interest rates by 25 basis points (bps) to 4.00%-4.25%.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near the weekly high around 97.80.
- This week, investors will focus on speeches from a slew of Federal Open Market Committee (FOMC) members, including Chairman Jerome Powell, to get cues on the monetary policy outlook for the remainder of the year.
- In the monetary policy announcement on Wednesday, the Fed’s dot plot showed that policymakers see the Federal Funds Rate heading to 3.6% by the end of the year, suggesting that the central bank will cut interest rates in both of the remaining meetings this year.
- On Friday, San Francisco Fed President Mary C. Daly clarified that the interest rate cut move by the Fed, the first this year, was to “try and bolster the weakening labor market”. Daly added that the job market has softened quite a bit from the last year, but it is difficult to gauge the impact of Artificial Intelligence (AI) when asked about whether AI is hampering job growth.
- On the economic data front, investors will focus on the preliminary US private sector Purchasing Managers’ Index (PMI) data for September, which will be released on Tuesday. The US Composite PMI is estimated to have grown at a steady pace to 54.6.
Technical Analysis: USD/INR stays above 20-day EMA
USD/INR rebounds to near 88.50 on Monday after correcting to near 88.20 on Friday. The near-term trend of the pair remains bullish as it stays above the 20-day Exponential Moving Average (EMA), which trades around 88.10.
The 14-day Relative Strength Index (RSI) recovers to near 60.00. A fresh bullish momentum would emerge if the RSI breaks above that level.
Looking down, the 20-day EMA will act as key support for the major. On the upside, the September 11 high of 88.65 would be the key hurdle for the pair.
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
