USD/INR attracts some sellers on weaker US Dollar, stronger Chinese Yuan

Indian Rupee recovers in Monday’s early European session.
Mounting concerns about US fiscal health and weaker US Dollar support the INR.
RBI rate cut bets and higher crude oil prices might cap the INR’s upside.

Lallalit Srijandorn FXStreet

The Indian Rupee (INR) edges higher on Monday after hitting its best performance in more than two years in the previous session. According to Bloomberg, the Indian currency’s biggest gain was seen after November 11, 2022, when it appreciated around 99 paise in a single day. Mounting concerns about US fiscal health and selling US Dollar from foreign banks provide support to the local currency.

Nonetheless, expectations of lower interest rates by the Reserve Bank of India (RBI) might weigh on the INR. A rise in crude oil prices could contribute to the INR’s downside. It’s worth noting that India is the world's third-largest oil consumer, and higher crude oil prices tend to have a negative impact on the INR value. Minutes of the Federal Open Market Committee (FOMC) will be the highlight later on Wednesday ahead of the US Consumption Expenditures (PCE) - Price Index report.

Indian Rupee gains momentum on news of tariff pause

US President Donald Trump said b on Sunday, that he agreed to an extension on the tariff deadline on the European Union (EU) until July 9, rescinding his threat of a 50% tariff from June 1.
India has surpassed Japan to become the world’s fourth-largest economy according to IMF data.
Chicago Federal Reserve (Fed) President Austan Goolsbee noted on Friday that Trump’s latest tariff threats have complicated policy and likely put off changes to interest rates.
Kansas City Fed President Jeffrey Schmid said that the officials will lean on hard data in making interest rate decisions and the Fed needs to be careful how much emphasis it puts on soft data.
Markets expect the US Federal Reserve (Fed) will cut twice this year, with the next move not happening until September.

USD/INR holds a bearish tone after facing rejection at the 100-day EMA

The Indian Rupee trades on a positive note on the day after facing rejection from the key 100-day Exponential Moving Average (EMA). The USD/INR pair keeps the bearish vibe on the daily chart, supported by the 14-day Relative Strength Index (RSI), which stands below the midline near 47.00.

The initial support level for USD/INR is seen at the 85.00 psychological level. A break below this floor could set off a drop to 84.84, the low of May 12. A breach of this level could expose the next bearish targets at 84.05, the lower limit of the trend channel.

On the upside, the immediate resistance level to watch is 85.58, the 100-day EMA. Any follow-through buying possibly sends the price back up to 85.80, the upper boundary of the trend channel. Further north, the next hurdle is located at 86.70, the high of April 9.

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.

AUD/USD consolidates gains above 0.700; focus on CPI data

AUD/USD has regained composure on Tuesday, reversing the previous day’s pullback and further extending its move past the key 0.7000 yardstick. The pair’s recovery has come despite another solid day for the Greenback ahead of the FOMC gathering. Moving forward, the release of inflation figures will be the main focus in Oz on Wednesday.

USD/JPY sticks to modest gains above 157.50 as traders await Fed, BoJ meetings

USD/JPY attracts buyers for the third straight day, recovering further from a one-month low ahead of Wednesday’s FOMC decision and the BoJ policy update on Friday. Meanwhile, expectations that the BoJ may hold off on aggressive rate hikes weigh on the Japanese Yen, and the US Dollar advances to a nearly two-week high, supporting the currency pair.

Gold holds above $4,000 as traders brace for Fed interest rate decision

Gold edges higher during American trading hours on Tuesday after trading in negative territory earlier in the day. A slight decline in Oil prices offers some relief, although a firmer USD limits the upside as traders await the Fed’s monetary policy announcement on Wednesday.

Australia CPI set to climb in September, fueling RBA rate-hike bets

The Australian Bureau of Statistics (ABS) will publish the September Consumer Price Index (CPI) on Wednesday at 00:30 GMT. The report is expected to show that inflation rose 4.2% from a year earlier, higher than the 4% posted in August. The monthly CPI is forecast at 0.7% following the 0.4% print from the previous month.

What can we expect from the RBNZ monetary policy decision?

On Wednesday, October 28 at 01:00 GMT, the Reserve Bank of New Zealand, led by Governor Anna Breman, is expected to raise the Overnight Cash Rate by 25 basis points, from 2.75% to 3%, as money markets price in a 100% chance. This would be the third-rate hike by the RBNZ, while the odds for another hike in December are nearly 50%.

Anthropic pledged $270 billion to Amazon, Google, and Microsoft. Here's who actually gets paid

Anthropic owes Amazon, Google, and Microsoft at least $269.4 billion for computing power, even if it uses less. All three sell its models and handle its billing, and Amazon and Google own stakes and lend it money, so they get paid regardless of how the IPO goes. The Dario Amodei-led Anthropic filed its initial public offering (IPO) on Monday, seeking a listing on the Nasdaq under the ticker ANT.