USD/INR loses traction on stronger Indian GDP, focus on US PMI, Fed’s Powell speech
- Indian Rupee gains traction on the upbeat Indian growth number.
- India’s GDP expanded by 7.6% for the Q2 of this fiscal year, making it the fastest-growing major economy.
- Investors will closely watch the US ISM Manufacturing PMI and Fed Chair Jerome Powell’s speech later on Friday.
Indian Rupee (INR) gathers strength on Friday, bolstered by the stronger-than-expected India’s growth number. The country’s GDP expanded 7.6% in the September quarter of this fiscal year and remained the fastest-growing major economy, according to the statistics ministry on Thursday. The expansion in the Indian economy was boosted by government spending and robust performance in the manufacturing, mining, and construction sectors. This reading came in better than the projections of 6.5% by the Reserve Bank of India (RBI).
Despite inflation falling to a four-month low of 4.87% in October, it is expected to remain above the RBI's 4% target for the next two years. The markets anticipate the RBI to remain hawkish in its upcoming policy and will keep its key interest rate unchanged at 6.50% for a fifth consecutive meeting.
Market players will focus on the US ISM Manufacturing PMI for November, due on Friday. The figure is expected to grow to 47.6 from 46.7. Furthermore, Fed Chair Jerome Powell is set to speak. Market anticipation has become more aggressive regarding Fed policy easing, with Fed funds futures now pricing five quarter-percentage-point rate cuts next year, according to the CME Group.
Daily Digest Market Movers: Indian Rupee trades on the front foot despite multiple global headwinds and uncertainties
- India’s NIFTY 50 hit an all-time high on Friday following the upbeat economic growth in the September quarter, which fueled confidence about the Indian economic outlook.
- The Indian economy grew 7.6% in the July–September quarter of the current fiscal year 2023-24, remaining the world’s fastest-growing major economy.
- India's fiscal deficit from April to October was 8.04 trillion Indian Rupees or 45% of the estimate for the whole year.
- Indian Prime Minister Narendra Modi said on Thursday that the GDP growth data for the second quarter of the current fiscal year demonstrated the Indian economy's resilience and strength in the face of global challenges.
- Domestic demand in India continues to be the primary driver of economic activity, as external demand remains fragile.
- The Reserve Bank of India (RBI) is likely to maintain its key interest rate unchanged at 6.50% for a fifth consecutive meeting on December 8, according to a Reuters poll.
- US Core Personal Consumption Expenditures Price Index (Core PCE), the Federal Reserve’s preferred inflation gauge rose 0.2% MoM and 3.5% YoY in October.
- US Initial weekly Jobless Claims rose to 218K from the previous period week of 211K, below the 220K expected while the Continuing Claims surged to 1.930 million versus the 1.841 decline prior.
- US Gross Domestic Product Annualized for the third quarter (Q3) expanded 5.2% in the third quarter (Q3) from 4.9% in the previous reading, better than 5.0% estimated.
Technical Analysis: The Indian Rupee maintains its positive view
Indian Rupee edges higher on the day. The USD/INR pair has traded within a familiar range of 82.80–83.40 since September. Technically, USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the upward momentum is reinforced by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline.
The upper boundary of the trading range at 83.40 acts as an immediate target for USD/INR bulls. Any follow-through buying will see the next hurdle at the year-to-date (YTD) high of 83.47, en route to a psychological round mark of 84.00. On the downside, the critical contention level will emerge at the 83.00 psychological mark. A breach of this level will pave the way to the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by 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 weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.83% | -1.13% | -0.69% | -0.94% | -1.77% | -1.14% | |
| EUR | 0.06% | -0.77% | -1.06% | -0.61% | -0.88% | -1.71% | -1.11% | |
| GBP | 0.82% | 0.77% | -0.28% | 0.16% | -0.09% | -0.94% | -0.31% | |
| CAD | 1.11% | 1.06% | 0.29% | 0.43% | 0.18% | -0.63% | -0.02% | |
| AUD | 0.66% | 0.64% | -0.13% | -0.43% | -0.25% | -1.07% | -0.47% | |
| JPY | 0.94% | 0.89% | 0.11% | -0.17% | 0.30% | -0.78% | -0.20% | |
| NZD | 1.75% | 1.69% | 0.92% | 0.63% | 1.07% | 0.81% | 0.61% | |
| CHF | 1.14% | 1.09% | 0.31% | 0.03% | 0.48% | 0.21% | -0.60% |
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.
