USD/INR struggles to extend upside despite upbeat US Dollar Index
- The Indian Rupee trades broadly vulnerable around 88.95 against the US Dollar.
- The amount of foreign outflow from the Indian equity market in October remained lower than what was seen in the past few months.
- Fed dovish bets have trimmed amid upside inflation risks.
The Indian Rupee (INR) strives to hold its immediate low around 89.00 against the US Dollar (USD) during afternoon trading hours in India on Monday. The USD/INR pair struggles to extend its gains, even as the US Dollar Index (DXY) rallies further, suggesting some strength in the Indian currency.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh three-month high around 99.95.
The Indian Rupee (INR) attracts slight bids amid a slowdown in the pace of Foreign Institutional Investors (FIIs) selling in the Indian stock market,
With the foreign outflow of Rs. 2,346.89 crores worth of shares from the Indian equity market in October, FIIs turned out to be net sellers for the fourth month in a row. However, the pace of FIIs selling appears to have slowed down significantly. The amount of stake pared by overseas investors in the Indian equity market in October is significantly lower than the average selling of Rs. 43,290.32 crores seen in the July-September period.
FIIs have been keeping a distance from the Indian stock market amid the delay in a breakthrough in trade talks between the United States (US) and India. Negotiators from both nations have been signaling that they are close to striking a trade agreement, but have not yet reached a consensus.
Meanwhile, a report from Reuters has shown that the odds of the Reserve Bank of India (RBI) intervening in the currency market are high as the USD/INR is approaching its all-time high of 89.12 posted in late September.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.14% | 0.11% | 0.22% | -0.05% | -0.03% | 0.26% | |
| EUR | -0.17% | -0.02% | -0.09% | 0.04% | -0.22% | -0.19% | 0.12% | |
| GBP | -0.14% | 0.02% | -0.06% | 0.06% | -0.18% | -0.17% | 0.15% | |
| JPY | -0.11% | 0.09% | 0.06% | 0.11% | -0.13% | -0.11% | 0.20% | |
| CAD | -0.22% | -0.04% | -0.06% | -0.11% | -0.29% | -0.21% | 0.07% | |
| AUD | 0.05% | 0.22% | 0.18% | 0.13% | 0.29% | 0.01% | 0.36% | |
| INR | 0.03% | 0.19% | 0.17% | 0.11% | 0.21% | -0.01% | 0.31% | |
| CHF | -0.26% | -0.12% | -0.15% | -0.20% | -0.07% | -0.36% | -0.31% |
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 Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily digest market movers: Easing Fed dovish bets strengthen US Dollar
- The US Dollar has been outperforming its peers amid escalating doubts over further interest rate cuts by the Federal Reserve (Fed) (Fed) for the December policy meeting.
- In Wednesday's monetary policy announcement, the Fed reduced interest rates for the second straight meeting by 25 basis points (bps) to 3.75%-4.00%, but Chair Jerome Powell argued against cutting interest rates again in the December meeting.
- Fed’s Powell stated that the December cut is “far from assured”. Powell clarified that there were “strongly different views” in the meeting, and the takeaway is that “we haven't made a decision about December", Bloomberg reported.
- Since then, traders have trimmed bets supporting more interest rate cuts by the Fed for the December policy meeting. According to the CME FedWatch tool, the probability of the Fed to cut interest rates by 25 basis points (bps) to 3.50%-3.75% in the December meeting has eased to 69.3% from 91.7% seen a week ago.
- Meanwhile, a few Federal Open Market Committee (FOMC) members have also argued against reducing interest rates further, citing that inflationary pressures are well above the central bank’s 2% target.
- "Given the move that we just made, I think we’re right around my estimate of neutral: I think we’re barely restrictive if at all," Cleveland Fed President Beth Hammack said on Friday. He added, “I do think we need to maintain some amount of restriction to help bring inflation back down to target,” Reuters reported.
- On the contrary, Fed Governor Christopher Waller has stressed on reducing interest rates further, in an interview on Fox Business Network, citing labor market risks. “The biggest concern we have right now is the labor market, while expressing confidence that price pressures are going to come back down.”
Technical Analysis: USD/INR approaches all-time high around 89.10
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USD/INR trades firmly near over two-week high around 88.95 at the start of the week. The near-term trend of the pair remains bullish as it trades above the 20-day Exponential Moving Average (EMA), which trades around 88.54.
The 14-day Relative Strength Index (RSI) breaks above 60.00. A fresh bullish momentum would emerge if the RSI sustains above that level.
Looking down, the August 21 low of 87.07 will act as key support for the pair. On the upside, the all-time high of 89.12 will be a key barrier.
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There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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.
