- Indian Rupee loses its recent gains on the renewed USD demand.
- The Dollar sales from banks, the decline in crude oil prices, and India’s robust growth outlook might limit the INR’s downside.
- Investors will closely monitor the US March CPI inflation report and the FOMC Minutes on Wednesday.
Indian Rupee (INR) loses its recovery momentum on Wednesday amid the modest rebound of US Dollar (USD). The markets turn cautious ahead of the key US inflation data, as it is expected to show a high inflation reading. However, the foreign and state-run banks' USD sales, lower crude oil prices, and robust growth prospects in the Indian economy might provide some support to the INR and cap the upside of the USD/INR pair.
The release of the US March Consumer Price Index (CPI) report and the FOMC Minutes will be the highlights on Wednesday. These events could offer some hints about the inflation trajectory and the path of the Fed’s monetary policy. On the Indian front, the market will be closed on Thursday for Eid al-Fitr. The attention will shift to the Indian CPI inflation report for March and Industrial Production for February, due on Friday.
Daily Digest Market Movers: Indian Rupee turns red amid the cautious mood
- India’s eight states will have an economy of over $1 trillion as the country moves towards becoming a developed nation by FY47, according to the India Ratings and Research (Ind-Ra) report.
- RBI Governor Shaktikanta Das said that inflation is moving closer to targets, projecting retail inflation for the current year at 4.5%. Nonetheless, uncertainties in food prices continue to pose challenges.
- India's robust growth prospects give the central bank the space to remain focused on inflation, RBI Governor Shaktikanta Das said.
- Chicago Fed President Austan Goolsbee said the recent jobs report was “quite strong”, but the central bank must weigh how much longer it can maintain its current interest rate stance without damaging the economy.
- Minneapolis Fed President Neel Kashkari said that the labor market is no longer ‘red hot’ but remains tight. He said his base case is that inflation continues to ease.
- The chance of a June rate cut dropped to nearly 57%, while the odds of a July cut have fallen below 75%, according to the CME’s FedWatch tool.
Technical analysis: USD/INR keeps the positive outlook intact in the longer term
The Indian Rupee trades softer on the day. USD/INR maintains its bullish stance unchanged in the long term since the pair has risen above a nearly four-month-old descending trend channel since March 22.
In the near term, USD/INR is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) remains above the 50-midline, indicating the support zones are more likely to hold than to break.
The key support level will emerge near the confluence of the psychological round mark and the 100-day EMA at the 83.00–83.50 region. The additional downside filter to watch is a low of March 14 at 82.80, followed by a low of March 11 at 82.65. On the upside, the first upside target is seen near a low of April 2 at 83.30. Further north, the next barrier is located near a high of April 5 at 83.45, en route to an all-time high of 83.70.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.00% | -0.04% | 0.12% | 0.01% | -0.13% | 0.09% | |
| EUR | -0.06% | -0.06% | -0.07% | 0.06% | -0.04% | -0.19% | 0.04% | |
| GBP | -0.01% | 0.04% | -0.04% | 0.10% | 0.00% | -0.14% | 0.08% | |
| CAD | 0.03% | 0.07% | 0.04% | 0.13% | 0.04% | -0.11% | 0.12% | |
| AUD | -0.11% | -0.06% | -0.08% | -0.13% | -0.10% | -0.25% | 0.00% | |
| JPY | -0.01% | 0.04% | 0.00% | -0.04% | 0.09% | -0.16% | 0.07% | |
| NZD | 0.13% | 0.19% | 0.14% | 0.11% | 0.25% | 0.14% | 0.22% | |
| CHF | -0.08% | -0.02% | -0.07% | -0.09% | 0.05% | -0.06% | -0.20% |
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 economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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