• Indian Rupee struggles to gain despite RBI’s intervention limiting the losses.
  • India's economy is estimated to grow 6.5% in this fiscal year.
  • Investors will monitor the preliminary US Consumer Sentiment data for November.

Indian Rupee (INR) trades flat on Friday despite the potential intervention from the Reserve Bank of India (RBI) limiting the depreciation in the local currency. In an interview with Nikkei Asia on Thursday, RBI Governor Shaktikanta Das said that geopolitical tensions across the globe have generated economic fragmentation that applies brakes and barriers to growth and supply chains, but he’s confident that India can rise amid the uncertainty.

India's economy is expected to grow 6.5% this fiscal year, the fastest-growing major economy in the world. The Indian Rupee’s upside seems limited as higher oil prices and the higher US Treasury bond yields remain in focus. Looking ahead, market players will monitor the preliminary US Consumer Sentiment for November, which is expected to grow to 63.7.

Daily Digest Market Movers: Indian Rupee trade unchanged amid the current uncertain environment

  • The Reserve Bank of India (RBI) Governor Shaktikanta Das expressed optimism about India's economic prospects but warned that the route to becoming a prosperous society may not be smooth.
  • RBI’s Monetary Policy Committee (MPC) in its October meeting, estimated Consumer Price Index (CPI) at 5.4% for 2023-24, a decline from 6.7% in 2022-23.
  • RBI Governor Das said India remains vulnerable to recurring and overlapping food price shocks and the monetary policy remains focused on keeping inflation at the 4% target. 
  • RBI forecasts India's Gross Domestic Product (GDP) will grow at 6.3% in the current fiscal year.
  • The US weekly Initial Jobless Claims rose by 217K versus 220K prior, below the expectation of 218K.
  • The Continuing Claims climbed to 1.834M from 1.812M in the previous week, the highest level since mid-April.
  • Fed Chair Jerome Powell said they are not confident that they have achieved a sufficiently restrictive policy to bring inflation down to 2% over time.
  • Fed Chair Powell further added that the Fed will not hesitate if it’s appropriate to tighten policy further.

Technical Analysis: The Indian Rupee stays range-bound, the upside seems limited

The Indian Rupee trades flat on the day. The USD/INR pair trades in a familiar range of 83.00–83.35 since September. According to the daily chart the USD/INR bullish potential remains intact as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA).

The upper boundary of the trading range at 83.35 acts as a key resistance level for USDINR. A decisive break above 83.35 will pave the way to the year-to-date (YTD) highs of 83.45. The additional upside filter to watch is a psychological round figure at 84.00. 

On the downside, a critical contention level will emerge at 83.00, representing the confluence of a low from October 24 and a round mark. Any follow-through selling below 83.00 will see losses extend to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.

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 weakest against the Euro.

USD   -0.50% -0.30% 0.38% 1.05% 0.58% -0.01% -0.31%
EUR 0.49%   0.21% 0.87% 1.53% 1.07% 0.49% 0.21%
GBP 0.30% -0.21%   0.66% 1.33% 0.87% 0.29% 0.02%
CAD -0.38% -0.87% -0.71%   0.68% 0.21% -0.38% -0.66%
AUD -1.05% -1.56% -1.35% -0.67%   -0.47% -1.05% -1.35%
JPY -0.59% -1.11% -0.90% -0.21% 0.47%   -0.59% -0.93%
NZD -0.01% -0.54% -0.31% 0.36% 1.04% 0.57%   -0.33%
CHF 0.28% -0.21% 0.00% 0.66% 1.33% 0.86% 0.29%  

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.

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