- Indian Rupee trades on a softer note on US Dollar demand.
- The higher-for-longer interest rate narrative in the US might lift the USD and cap upside in the INR.
- The US GDP growth number for Q4 will be due on Wednesday.
Indian Rupee (INR) edges lower on Monday amid US Dollar (USD) demand from oil companies and other importers. The hawkish comments from Fed officials about keeping the policy rate higher for longer might cap any substantial upside in the INR. However, the potential intervention from the Reserve Bank of India (RBI) might curb excess volatility in the INR.
According to the minutes of the RBI's latest policy meeting, the MPC agreed that the Indian economy is currently showing resilience on the growth front. However, the uncertainty, food inflation volatility, and geopolitical spillovers could cap the upside of the INR.
Investors await the US Gross Domestic Product Annualized for the fourth quarter (Q4) on Wednesday and the Core Personal Consumption Expenditures Price Index (Core PCE) on Thursday. On the Indian docket, the GDP annual growth numbers and Federal Fiscal Deficit will be released on Thursday. The Indian S&P Global Manufacturing PMI for February will be published on Friday.
Daily Digest Market Movers: Indian Rupee remains sensitive to inflation and geopolitical tensions
- India's foreign exchange reserves fell for the second week in a row, reaching a two-month low of $616.10 billion on February 16, according to the Reserve Bank of India.
- The RBI revised its growth forecast for the Indian economy to 7% for the current fiscal year, an increase from its earlier forecast of 6.5%.
- The RBI’s Monetary Policy Committee agrees on the need for caution amid uncertainties, while being optimistic about growth.
- The Indian economy, which grew at a four-month high in January, expanded further in February, with accelerations in both the manufacturing and services sectors.
- Fed Governor Christopher Waller said the Fed should delay interest rate cuts by at least a few more months to see more evidence of inflation data.
Most recent article: Stock Market Today: Nifty and Sensex open lower to begin a new week
Technical Analysis: Indian Rupee remains capped within the 82.70–83.20 range in the longer-term
Indian Rupee trades in negative territory on the day. USD/INR remains stuck within a multi-month-old descending trend channel of 82.70–83.20 since December 8, 2023.
The USD/INR bearish short-term outlook remains unchanged as the pair trades below the crucial 100-day Exponential Moving Average (EMA) on the daily chart. Furthermore, the 14-day Relative Strength Index (RSI) is below the 50.0 midline, suggesting the path of least resistance level is to the downside.
The first support level of the pair will emerge at the lower limit of the descending trend channel at 82.70. A decisive break below the mentioned level could see a drop to the next downside target at a low of August 23 at 82.45 and a low of June 1 at 82.25.
On the flip side, the immediate resistance level is seen at the psychological round mark and the 100-day EMA at 83.00. Any follow-through buying will send USD/INR on track towards testing the upper boundary of the descending trend channel at 83.20, en route to a high of January 2 at 83.35, and finally a round figure at 84.00.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | 0.03% | 0.01% | 0.14% | -0.08% | 0.31% | -0.05% | |
| EUR | 0.04% | 0.07% | 0.05% | 0.18% | -0.04% | 0.35% | -0.01% | |
| GBP | -0.03% | -0.07% | -0.02% | 0.11% | -0.10% | 0.27% | -0.09% | |
| CAD | -0.02% | -0.06% | 0.01% | 0.14% | -0.10% | 0.30% | -0.06% | |
| AUD | -0.16% | -0.18% | -0.11% | -0.13% | -0.22% | 0.16% | -0.20% | |
| JPY | 0.07% | 0.04% | 0.15% | 0.09% | 0.22% | 0.40% | 0.03% | |
| NZD | -0.32% | -0.35% | -0.27% | -0.29% | -0.16% | -0.38% | -0.35% | |
| CHF | 0.04% | 0.00% | 0.07% | 0.06% | 0.20% | -0.04% | 0.36% |
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.
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