- Indian Rupee trades in negative territory despite the weaker USD on Monday.
- Analysts anticipate the RBI will continue to keep its policy rate steady at 6.5% in FY25, given India's robust economy.
- The Federal Open Market Committee (FOMC) monetary policy meeting on Wednesday will be in the spotlight.
Indian Rupee (INR) loses momentum on Monday despite the softer US Dollar (USD) and lower crude oil prices. There is growing speculation that the US Federal Reserve (Fed) might delay rate cuts to September as inflation was stickier than expected and remains above the Fed’s 2% target. On the other hand, Morgan Stanley analysts expect the Reserve Bank of India (RBI) is unlikely to lower interest rates in the ongoing financial year due to India's robust economic growth. The higher-for-longer stance of the RBI might support the INR and cap the upside of USD/INR. However, the rising US Treasury bond yields and rebound in oil prices might drag the local currency lower.
Looking ahead, investors will keep an eye on the US ADP Employment Change, ISM Manufacturing PMI, and the Federal Open Market Committee (FOMC) interest rate decision on Wednesday. On Friday, attention will shift to the April employment data, including the Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings. On the Indian docket, India’s HSBC Manufacturing PMI for April will be released on Thursday.
Daily Digest Market Movers: Indian Rupee loses ground amid multiple headwinds
- Deloitte India estimates India's GDP growth at 6.6% in the current fiscal year, supported by consumption expenditure, exports rebound, and capital flows.
- In contrast to the global scenario, the Indian economy continues to exhibit strong economic performance with broad-based growth across sectors, according to the Monthly Economic Review report of the Department of Economic Affairs under the Finance Ministry.
- The US Personal Consumption Expenditures (PCE) Price Index, climbed by 2.7% YoY in March, compared to 2.5% in February, above the market consensus of 2.6%.
- The Core PCE, excluding volatile food and energy prices, held steady at 2.8% YoY in March, stronger than the expectation of 2.6%.
- On a monthly basis, both headline PCE and the core PCE Price Index were in line with market expectations, rising 0.3% in March.
- According to the CME FedWatch tool, the chance of a rate cut by the July meeting fell from 50% last week to 25%, while traders have priced in nearly 60% odds that the Fed will cut the interest rate at its September meeting.
Technical analysis: USD/INR remains constructive in the longer term
The Indian Rupee trades stronger on the day. The bullish outlook of USD/INR remains intact as the pair is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Additionally, the 14-day Relative Strength Index (RSI) holds in bullish territory above the 50 midline, indicating the path of least resistance is to the upside.
The first bullish target will emerge near a high of April 15 at 83.50. Any follow-through buying will see a rally to an all-time high of 83.72. The additional upside filter to watch is the 84.00 psychological level. On the flip side, the initial support level for the pair is seen near a low of April 26 at 83.23. The crucial downside target of USD/INR is located at the 83.10–83.15 zone, representing the confluence of the 100-day EMA and a low of April 10. A breach of this level will pave the way to a low of January 15 at 82.78.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.60% | -1.24% | -0.64% | -2.11% | 1.53% | -1.14% | 0.12% | |
| EUR | 0.58% | -0.64% | -0.06% | -1.51% | 2.10% | -0.54% | 0.70% | |
| GBP | 1.22% | 0.63% | 0.59% | -0.86% | 2.73% | 0.10% | 1.34% | |
| CAD | 0.63% | 0.04% | -0.59% | -1.46% | 2.15% | -0.50% | 0.75% | |
| AUD | 2.08% | 1.48% | 0.84% | 1.42% | 3.55% | 0.94% | 2.18% | |
| JPY | -1.54% | -2.14% | -2.80% | -2.21% | -3.70% | -2.70% | -1.42% | |
| NZD | 1.09% | 0.51% | -0.15% | 0.46% | -0.99% | 2.60% | 1.21% | |
| CHF | -0.14% | -0.71% | -1.37% | -0.77% | -2.22% | 1.40% | -1.25% |
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
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.
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.
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.
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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