USD/INR stays near day's low amid RBI's intervention

The Indian Rupee recovers sharply against the US Dollar after the RBI’s intervention.
Iran expresses openness to withdraw its nuclear plans in return for a rewarding alternative offer.
Investors await the US NFP data for fresh cues on the current state of the labor market.

Sagar Dua FXStreet

The Indian Rupee (INR) snaps a five-day losing streak against the US Dollar (USD) on Thursday. The USD/INR pair retraces to near 91.80 as the Reserve Bank of India (RBI) has intervened in the foreign exchange market to offer support to the Indian Rupee against one-way excessive moves, according to Reuters.

The RBI was highly anticipated to intervene as the USD/INR pair hit a fresh all-time high of 92.67 on Wednesday amid a significant outflow of foreign funds from the Indian stock market and higher oil prices due to the war in the Middle East.

In the first two trading days of March, Foreign Institutional Investors (FIIs) have offloaded their stake worth Rs. 12,048.29 crore, almost double what they pared in the entire February. FIIs continue to distance themselves from the Indian equity market despite improving trading relations between the United States (US) and India.

Global oil prices jumped earlier this week due to the war between the US, Israel, and Iran, which has badly battered the currencies of nations that rely heavily on oil imports to meet their energy needs.

Meanwhile, a report from Sky News Arabia has shown that Iran is ready to give up its intentions to build nuclear infrastructure. "Iran is ready to abandon its nuclear program on the condition that the United States presents a rewarding alternative offer," Iran's Deputy Foreign Minister Saeed Khatibzadeh said.

The news release has improved market sentiment and has diminished the safe-haven demand of the US Dollar. As of writing, the US Dollar Index (DXY) has given up some of its early gains, but is still 0.2% higher to near 99.00.

Meanwhile, receding dovish Federal Reserve (Fed) prospects continue to support the US Dollar. The CME FedWatch tool shows that the odds of the Fed holding interest rates in the July meeting have increased to 50.2% from 37.9% seen on Tuesday.

Traders pare dovish Fed bets amid improving US employment conditions and signs of accelerating factory-level inflation. The ADP Employment Report showed on Wednesday that the US private sector created 63K fresh jobs in February, significantly higher than the 50K estimate and the prior reading of 11K.

Earlier this week, the US ISM Manufacturing PMI report showed that its sub-component Prices Paid, a key measure of factory-level inflation, soared to 70.5 in February against 59.5 estimates and the previous reading of 59.0.

For more cues on the current state of the US labor market, investors will focus on the Nonfarm Payrolls (NFP) data for February, which will be released on Friday.

Technical Analysis: USD/INR continues to hold 20-day EMA

USD/INR corrects sharply to near 91.82 during the Asian trading session on Thursday. Still, the near-term tone remains bullish as spot holds above the rising 20-day Exponential Moving Average (EMA), which is near 91.36.

The 14-day Relative Strength Index (RSI) falls to near 62 after turning slightly overbought, indicating positive momentum has cooled but still favors dips being absorbed rather than an immediate trend reversal.

Initial support emerges at the 20-day EMA around 91.36, with a break exposing secondary support at 91.00 and then the prior reaction low near 90.60. On the topside, resistance is located at the March 4 high of 92.67.

(The technical analysis of this story was written with the help of an AI tool.)

Economic Indicator

ADP Employment Change

The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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