- Indian Rupee loses ground despite the weaker US Dollar (USD).
- RBI kept the key repo rate steady at 6.5%, signaling the battle against persistently high inflation is not over yet.
- The US GDP growth numbers for Q4 will be in the spotlight next week.
Indian Rupee (INR) edges lower on Friday despite the decline of the US Dollar (USD). The minutes of the Federal Reserve (Fed) at its January meeting, along with a weaker-than-expected bond auction, pushed US Treasury yields higher and weighed on the INR.
According to the minutes of the Reserve Bank of India (RBI) MPC meeting, RBI governor Shaktikanta Das said any premature move may undermine the success achieved so far. RBI’s Das added that the central bank remained cautious about inflation data due to uncertainty in food prices, rising geopolitical tensions, and supply chain disruptions, as a new flash point also poses further risks to the inflation outlook.
In the absence of top-tier economic data released this week from the US and India, risk sentiment could influence the price action of USD/INR. The attention will shift to the US Gross Domestic Product Annualized (GDP) for the fourth quarter next week for fresh impetus.
Daily Digest Market Movers: Indian Rupee remains vulnerable to high inflation and uncertainties
- India’s S&P Global Services PMI rose to 62.0 in February from 61.8 in January.
- India’s Manufacturing PMI eased to 56.7 in February from 56.9 in the previous reading. The Composite PMI arrived at 61.5 in February versus 61.2 prior.
- US Initial Jobless Claims for the week ending February 17 fell to 201K from the previous weeks of 213K. Continuing Claims dropped to 1.862M, below expectations and the prior week.
- US Manufacturing PMI climbed to 51.5 in February from 50.7 in January, better than the expectation of 50.5. The Services PMI eased to 51.3 in February from 52.5 in January, weaker than 52.00 expected.
- Fed Governor Christopher Waller said there is no rush to begin cutting interest rates. However, he will need to see further evidence that inflation is cooling before supporting interest rate cuts.
Most recent article: Nifty and Sensex defend gains, tracking global cues
Technical Analysis: Indian Rupee weakens in the long-term trading range of 82.70–83.20
Indian Rupee trades softer on the day. USD/INR remains capped within a multi-month-old descending trend channel between 82.70 and 83.20 since December 8, 2023.
In the near term, the bearish outlook of USD/INR remains intact as the pair is below the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) stands below the 50.0 midline, indicating that further decline looks favorable.
The potential support level for USD/INR will emerge at the lower limit of the descending trend channel at 82.70. A decisive break below this level will expose 82.45 (low of August 23), followed by 82.25 (low of June 1).
On the other hand, the key upside barrier is seen at the 83.00 mark, portraying the psychological round figure and the 100-day EMA. A break above this level will pave the way to the upper boundary of the descending trend channel at 83.20. Further north, the next hurdle is located at 83.35 (high of January 2), en route to 84.00 (round figure).
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.01% | 0.01% | 0.00% | -0.16% | 0.10% | -0.07% | 0.09% | |
| EUR | -0.02% | -0.01% | -0.01% | -0.16% | 0.09% | -0.10% | 0.06% | |
| GBP | -0.01% | 0.01% | -0.01% | -0.16% | 0.09% | -0.08% | 0.08% | |
| CAD | 0.00% | 0.01% | 0.01% | -0.16% | 0.11% | -0.08% | 0.08% | |
| AUD | 0.16% | 0.17% | 0.16% | 0.16% | 0.26% | 0.09% | 0.21% | |
| JPY | -0.11% | -0.10% | -0.10% | -0.08% | -0.25% | -0.19% | -0.02% | |
| NZD | 0.03% | 0.09% | 0.09% | 0.08% | -0.08% | 0.18% | 0.16% | |
| CHF | -0.08% | -0.07% | -0.08% | -0.09% | -0.24% | 0.01% | -0.16% |
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 economy FAQs
How does the Indian economy impact the Indian Rupee?
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.
What is the impact of Oil prices on the Rupee?
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.
How does inflation in India impact 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.
How does seasonal US Dollar demand from importers and banks impact 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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