USD/INR loses ground on the softer USD, focus on US Jobless Claims
- Indian Rupee trades on a positive note on the weaker US Dollar.
- CEBR stated in its report that India is expected to be the largest economic superpower by 2100.
- US Initial weekly Jobless Claims, November’s Trade Balance and Pending Home Sales will be released on Thursday.
Indian Rupee (INR) holds positive ground on Thursday amid the US Dollar (USD) weakness. India is set to become the world's third-biggest by 2032 and will eventually surpass China and the United States to become the "world's largest economic superpower" by 2100, the Centre for Economics and Business Research (CEBR) stated in its report on Wednesday. Earlier this week, Fitch Ratings projected India to be the world’s fastest-growing country, with resilient GDP growth of 6.5% during fiscal 2024–25.
Nonetheless, the next general elections in India will be closely watched by investors as the outcomes will significantly impact India's domestic and foreign policy. Later on Thursday, market players will focus on the US Initial weekly Jobless Claims, Trade Balance for November, and Pending Home Sales. These figures might not have a significant impact on the market as traders enter holiday mode heading into 2024.
Daily Digest Market Movers: Indian Rupee shows resilience amid multiple headwinds
- USD/INR had its best day in nearly three months on Wednesday, likely related to monthly currency futures-linked dollar demand, traders said.
- According to the Reserve Bank of India (RBI), the Gross Non-Performing Asset (GNPA) ratio of Indian banks improved further in the second quarter of the current fiscal year, easing to a new decadal low.
- India's current account deficit narrowed to $8.3 billion in the second quarter of 2023–24.
- India's foreign currency reserves were $606.9 billion on December 8, ranking fourth among major foreign exchange reserve-holding countries, and increased by $28.4 billion during 2023–2024.
- The US Richmond Fed Manufacturing Index fell to 11 in December from a 5 drop in November, below the market consensus of -7.
- The US Dallas Fed Manufacturing Business Index for December came in at -9.3 versus -19.9 prior. November's Chicago Fed National Activity Index arrived at 0.03 from a 0.49 decline in the previous reading.
Technical Analysis: Indian Rupee extends the longer-term range theme
Indian Rupee trades firmer on the day. The USD/INR pair maintains a multi-month-old trading band of 82.80–83.40 unchanged. From a technical perspective, the further upside of USD/INR looks favorable as the pair holds above the key 100-period Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) contributed to the upward momentum as it bounces back above the 50.0 midpoint.
The immediate resistance level of the pair will emerge at the upper boundary of the trading range at 83.40. Further north, the year-to-date (YTD) high of 83.47 and the 84.00 psychological mark will be the next upside targets. On the downside, the critical support level for USD/INR is seen near the round figure at 83.00. The additional downside filter to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A breach of this level will pave the way to 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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.54% | -1.36% | -1.23% | -1.63% | -1.70% | -1.50% | -2.66% | |
| EUR | 1.52% | 0.19% | 0.32% | -0.06% | -0.11% | 0.09% | -1.09% | |
| GBP | 1.34% | -0.19% | 0.13% | -0.25% | -0.34% | -0.12% | -1.29% | |
| CAD | 1.21% | -0.32% | -0.13% | -0.39% | -0.46% | -0.26% | -1.42% | |
| AUD | 1.60% | 0.07% | 0.26% | 0.39% | -0.04% | 0.13% | -1.03% | |
| JPY | 1.68% | 0.10% | 0.33% | 0.46% | 0.07% | 0.22% | -0.97% | |
| NZD | 1.45% | -0.06% | 0.11% | 0.24% | -0.16% | -0.20% | -1.18% | |
| CHF | 2.60% | 1.08% | 1.28% | 1.40% | 1.01% | 0.96% | 1.16% |
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.
