USD/INR attracts some sellers, eyes on Indian Trade Balance, US Retail Sales data
- Indian Rupee gains traction amid the softer USD and lower bond yields.
- Indian CEA said the government is worried about headline retail inflation but is confident that India can manage it well.
- The Indian Trade Balance and US January Retail Sales will be due later on Thursday.
Indian Rupee (INR) attracts some buyers on Thursday amid the decline of the US Dollar (USD) and lower US Treasury bond yields. The Reserve Bank of India (RBI) held interest rates steady at its bi-monthly monetary policy earlier this month, with an effort to bring down headline retail inflation to 4%, while retail inflation continues to exceed 5%.
Chief economic advisor (CEA) V. Anantha Nageswaran said that since wholesale inflation has been eased, the Indian government is little worried about headline retail inflation, but is confident that India will be able to effectively manage it. Investors expect the RBI to maintain the hawkish stance in the near term and not to ease policy ahead of the US Federal Reserve (Fed), which might lift the INR and cap the upside of the USD/INR pair.
The Indian Trade Balance will be due at 10:00 GMT on Thursday. On the US docket, the January Retail Sales, Philly Fed Manufacturing Index, Industrial Production, and weekly Initial Jobless Claims will be released later in the day.
Related read: Nifty and Sensex kick off Thursday with modest gains
Daily Digest Market Movers: Indian Rupee remains vulnerable in the face of higher oil prices and inflation
- India's Wholesale Price Index-based inflation eased further to 0.27% YoY in January from 0.73% in December, below the market consensus of 0.53%, according to the Commerce Ministry.
- India’s Wholesale Price Index (WPI) Food arrived at 6.85% in January versus 9.38% prior.
- India's Retail inflation softened to 5.10% on an annual basis in January from 5.69% in December, better than the estimation of 5.09%.
- The hotter-than-expected US inflation data last week convinced Fed officials to maintain a cautious approach as they further evaluate the trajectory of inflation in the coming months.
- Fed Vice Chair for Supervision Michael Barr said that the Fed remains confident that US inflation is on the way to hitting the central bank's 2% target. However, Barr emphasized the necessity of further positive data before advocating interest rate cuts.
- Fed fund futures traders have priced in an 8% chance of a rate cut in the March policy meeting, from a 76.9% possibility a month ago, according to the CME FedWatch Tool.
Technical Analysis: Indian Rupee inches higher within the long-term trading range
Indian Rupee trades stronger on the day. USD/INR remains confined within a familiar multi-month-old descending trend channel of 82.70–83.20 since December 8, 2023.
In the near term, USD/INR keeps a neutral bias and continues its non-directional action as the pair hovers around the key 100-period Exponential Moving Average (EMA) on the daily timeframe. It’s worth noting that the 14-day Relative Strength Index lies below the 50.0 midline, suggesting that further decline cannot be ruled out.
A decisive break above the upper boundary of the descending trend channel at 83.20 could get enough fuel to hit a high of January 2 at 83.35, en route to the 84.00 psychological level.
On the downside, the 83.00 psychological round mark acts as an initial support level for USD/INR. The next downside target will emerge at a low of February 2 at 82.83. A potential support level is located at the lower limit of the descending trend channel at 82.70, followed by 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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.04% | 0.02% | 0.08% | -0.29% | 0.03% | -0.10% | |
| EUR | 0.01% | -0.05% | 0.03% | 0.09% | -0.27% | 0.05% | -0.08% | |
| GBP | 0.04% | 0.01% | 0.06% | 0.13% | -0.25% | 0.08% | -0.04% | |
| CAD | -0.02% | -0.04% | -0.06% | 0.06% | -0.30% | 0.02% | -0.10% | |
| AUD | -0.06% | -0.11% | -0.11% | -0.06% | -0.38% | -0.04% | -0.16% | |
| JPY | 0.28% | 0.27% | 0.23% | 0.30% | 0.34% | 0.30% | 0.20% | |
| NZD | -0.05% | -0.07% | -0.08% | -0.03% | 0.03% | -0.32% | -0.13% | |
| CHF | 0.10% | 0.08% | 0.05% | 0.13% | 0.17% | -0.20% | 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).
RBI FAQs
What is the role of the Reserve Bank of India?
The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
How do the decisions of the Reserve Bank of India affect the Rupee?
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Does the Reserve Bank of India directly intervene in FX markets?
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.
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.
