- Indian Rupee recovers its recent losses on the weaker USD.
- RBI’s Das said the Indian economy is likely to grow close to 8.0% in FY24, exceeding the estimate of 7.6%.
- Investors will focus on the US weekly Initial Jobless Claims and the second testimony by Fed Chair Powell on Thursday.
Indian Rupee (INR) edges higher on Thursday amid the decline of the US Dollar Index (DXY). Economists anticipate USD/INR to trade in a narrow band in the next months and to rise modestly in a year as the Reserve Bank of India (RBI) continues to intervene in currency markets.
On Wednesday, RBI governor Shaktikanta Das said the Indian economy is poised to grow more than the central government's second-advance estimate of 7.6% growth in the current financial year (FY24), and it might be closer to 8.0%. India's robust domestic growth along with stable external macros has been underpinning the strength in INR. Nonetheless, higher US Treasury bond yields and the rebound in oil prices might lift the US Dollar (USD) and cap the downside of the pair.
Looking ahead, the US weekly Initial Jobless Claims and Trade Balance are due on Thursday, along with the second testimony by Chair Powell and the Fed’s Mester speech. On Friday, attention will shift to the highly-anticipated US Nonfarm Payrolls, which is forecast to see 200K job additions in February from 353K in January.
Daily Digest Market Movers: Indian Rupee remains sensitive to higher bond yields and a rise in oil prices
- The government raised its growth forecast for the fiscal year 2024 to 7.6% from 7.3%.
- India's GDP expanded at 8.4% in the final three months of 2023, the strongest in 18 months, boosted by robust manufacturing and construction activities.
- US ADP private sector employment rose 140K in February from 111K in January, below the market expectation of 150K.
- January JOLTS job openings dropped to 8.863M versus 9.026M prior, below the consensus of 8.900M.
- The Federal Reserve (Fed) Chair Jerome Powell said on Wednesday that interest rate cuts are likely at some point in 2024, but is not yet ready to say when.
- Powell noted that the central bank thinks it’s not appropriate to cut the rate until they have confidence that inflation is moving sustainably toward 2%.
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Technical Analysis: Indian Rupee remains capped in a longer-term band of 82.65-83.15
Indian Rupee trades strongly on the day. USD/INR has been traded within a multi-month-old descending trend channel since December 8, 2023 around 82.65-83.15
USD/INR maintains the bearish outlook unchanged as the pair holds below the 100-day Exponential Moving Average (EMA) on the daily chart. It’s worth noting that the 14-day Relative Strength Index (RSI) supports the sellers for the time being as it lies below the 50.0 midline.
If the pair breaks below the key support level near the lower limit of the descending trend channel at 82.65, then USD/INR may get enough bearish pressure to test lower near a low of August 23 at 82.45 and finally a low of June 1 at 82.25.
A bullish breakout above the confluence of the 100-day EMA and a psychological round figure of 83.00 could attract bulls to the upper boundary of the descending trend channel at 83.15. The additional upside filter to watch is a high of January 2 at 83.35, en route to 84.00.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.02% | -0.03% | -0.27% | -0.62% | -0.30% | -0.12% | |
| EUR | 0.03% | 0.01% | 0.00% | -0.24% | -0.59% | -0.28% | -0.08% | |
| GBP | 0.02% | -0.01% | -0.01% | -0.25% | -0.61% | -0.28% | -0.09% | |
| CAD | 0.03% | 0.00% | 0.00% | -0.25% | -0.60% | -0.30% | -0.09% | |
| AUD | 0.26% | 0.23% | 0.24% | 0.23% | -0.35% | -0.05% | 0.16% | |
| JPY | 0.62% | 0.58% | 0.59% | 0.57% | 0.35% | 0.31% | 0.50% | |
| NZD | 0.29% | 0.27% | 0.28% | 0.27% | 0.04% | -0.31% | 0.19% | |
| CHF | 0.10% | 0.07% | 0.08% | 0.08% | -0.15% | -0.51% | -0.19% |
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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