- Indian Rupee trades on a stronger note as the US Dollar recovery loses steam.
- Indian government plans to lower deficit in the 2024-25 fiscal year despite lifting capital expenditure to an all-time high.
- The December US Core Personal Consumption Expenditures Price Index (Core PCE) will be in the spotlight on Friday.
Indian Rupee (INR) edges higher on Friday on a modest decline of US Dollar (USD). India’s interim budget for fiscal year 2024-25 (FY25) will be announced by Union Finance Minister Nirmala Sitharaman on February 1. The Fiscal Budget 2024-25 will mainly focus on government spending and no major change is expected until a new government takes control following the general elections.
The budget is expected to target a narrowing of the fiscal deficit as a percentage of GDP to 5.30% in 2024-25. The Indian government is poised to increase welfare expenditure and might lower the budget deficit to 4.5% of GDP by the fiscal year 2025-26.
The highlight on Friday will be the release of the US Core Personal Consumption Expenditures Price Index (Core PCE) for December, the Fed’s preferred inflation measure. The Core PCE is forecast to show an increase of 0.2% MoM and 3.0% YoY. Indian markets will be closed on Friday for Republic Day.
Daily Digest Market Movers: Indian Rupee gains momentum ahead of the release of Fiscal Budget 2024-25
- Foreign investors sold nearly $2 billion in Indian equities in January, after a net purchase of $7.9 billion the previous month.
- India will continue to be the fastest-growing major economy this year and next, driven by ongoing strong government spending, according to a Reuters poll of economists.
- The US Gross Domestic Product (GDP) grew at a 3.3% annualized rate in the fourth quarter of 2023, compared to 4.9% in the previous reading, stronger than expected
- US Initial Jobless Claims for the week ending January 20 totaled 214,000 from 189,000 in the previous week, worse than the market expectation of 200,000. Continuing Claims rose to 1.833 million from the previous reading of 1.806 million.
- The Durable Goods Orders were stagnant in December against expectations of 1.1%.
Technical Analysis: Indian Rupee clings to the multi-month trading range of 82.80–83.40
Indian Rupee trades firmly on the day. The USD/INR pair has traded within a familiar trading band of 82.80–83.40 since September 2023. According to the daily chart, USD/INR holds above the key 100-period Exponential Moving Average (EMA). The upward momentum looks vulnerable and the further decline cannot be ruled out as the 14-day Relative Strength Index (RSI) stands below the 50.0 midline.
The initial support level for USD/INR will emerge at the 83.00 psychological mark. The additional downside filter to watch is the confluence of the lower limit of the trading range and a low of January 15 at 82.80, followed by a low of August 11 at 82.60. On the upside, the upper boundary of the trading range at 83.40 acts as an immediate resistance level for the pair. Further north, the next upside target is located at a 2023 high of 83.47 and the psychological mark at 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 Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.15% | 0.09% | -0.04% | -0.01% | 0.02% | 0.09% | 0.10% | |
| EUR | -0.15% | -0.05% | -0.19% | -0.17% | -0.11% | -0.06% | -0.05% | |
| GBP | -0.10% | 0.05% | -0.14% | -0.12% | -0.06% | 0.00% | 0.01% | |
| CAD | 0.04% | 0.19% | 0.13% | 0.01% | 0.06% | 0.13% | 0.14% | |
| AUD | 0.03% | 0.17% | 0.12% | -0.01% | 0.06% | 0.12% | 0.12% | |
| JPY | -0.03% | 0.11% | 0.08% | -0.08% | -0.06% | 0.07% | 0.08% | |
| NZD | -0.09% | 0.04% | 0.00% | -0.15% | -0.12% | -0.06% | 0.01% | |
| CHF | -0.10% | 0.04% | -0.01% | -0.14% | -0.13% | -0.08% | 0.00% |
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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