USD/INR gains traction, US Jobless Claims loom
- Indian Rupee loses traction on the renewed US Dollar buying.
- The markets anticipate the Reserve Bank of India (RBI) to maintain the status quo on the repo rate, leaving it unchanged at 6.5%.
- Investors await the US weekly Jobless Claims on Thursday ahead of the RBI rate decision and US Nonfarm Payrolls.
Indian Rupee (INR) continue to trade on a negative note on Thursday amid the renewed US Dollar (USD) demand. The Reserve Bank of India's (RBI) three-day monetary policy meeting began on Wednesday. RBI Governor Shaktikanta Das will announce the Monetary Policy Committee (MPC) decision on Friday.
The markets widely anticipate that RBI will maintain the interest rate unchanged at 6.50% for the fifth consecutive monetary policy meeting. The elevated inflation above the 4% target, the volatility of crude oil prices, and the concern about El Nino and agricultural output will keep the central bank on hold.
Investors will monitor the US weekly Jobless Claims, due later on Thursday. The highlight this week will be the RBI interest rate decision and the US employment data, including Nonfarm Payrolls and Unemployment Rate on Friday. The November Nonfarm Payrolls is estimated to rise by 185K, while the unemployment rate is expected to stay unchanged at 3.9%.
Daily Digest Market Movers: Indian Rupee weakens due to a slowdown in services sector growth
- Indian equities have seen inflows of more than $3 billion in December, according to National Securities Depository.
- India is on the path to becoming the world's third-biggest economy by 2030, according to S&P Global Ratings' latest report.
- India’s stock market value surpassed $4 trillion for the first time, fueled by moderate oil prices, resilient domestic macroeconomic data, renewed foreign inflows, and growing optimism about policy continuity in 2024 after the state assembly election results.
- S&P Global India Services PMI eased to 56.9 in November from 58.4 in October, below market consensus of 58.0.
- ADP private payrolls rose 103K in November from 106K in October, below the market estimation of 130K.
- Analysts anticipate the tightening cycle is now over and the Fed will hold interest rates until at least July, later than earlier thought, according to a Reuters poll.
Technical Analysis: Indian Rupee’s outlook remains constructive
Indian Rupee weakens on the day. The USD/INR pair remains in a familiar multi-month-old trading band of 82.80–83.40. According to the daily chart, USD/INR maintains a bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA). The upward momentum is supported by the 14-day Relative Strength Index (RSI), which remains above the 50.0 midpoint.
The first upside barrier will emerge at the upper boundary of the trading range of 83.40. The additional upside filter to watch is the year-to-date (YTD) high of 83.47. Further north, the next hurdle is seen at a psychological round mark of 84.00.
On the downside, the strong support is envisioned at the 83.00 psychological figure. A decisive break below 83.00 will pave the way to 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. The next cushion is located at a low of August 11 at 82.60.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.89% | 1.10% | 0.07% | 1.04% | -0.56% | 0.40% | 0.20% | |
| EUR | -1.94% | -0.83% | -1.85% | -0.89% | -2.49% | -1.53% | -1.74% | |
| GBP | -1.11% | 0.80% | -1.03% | -0.05% | -1.66% | -0.70% | -0.88% | |
| CAD | -0.08% | 1.81% | 1.01% | 0.95% | -0.63% | 0.31% | 0.12% | |
| AUD | -1.07% | 0.85% | 0.05% | -0.98% | -1.60% | -0.68% | -0.86% | |
| JPY | 0.53% | 2.42% | 1.62% | 0.62% | 1.55% | 0.93% | 0.76% | |
| NZD | -0.39% | 1.52% | 0.71% | -0.31% | 0.65% | -0.95% | -0.18% | |
| CHF | -0.19% | 1.71% | 0.88% | -0.13% | 0.84% | -0.76% | 0.20% |
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
What are the key factors driving the Indian Rupee?
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.
How do the decisions of the Reserve Bank of India impact the Indian 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.
What macroeconomic factors influence the value of the Indian Rupee?
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.
How does inflation impact the Indian 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
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.
