USD/INR flattens ahead of US markets opening, FOMC Minutes
- The Indian Rupee trades calmly around 90.80 against the US Dollar.
- The Indian equity market struggles to lure overseas investors despite the US-India trade deal.
- Investors await US-Iran talks, FOMC Minutes, and flash US Q4 GDP data.
The Indian Rupee (INR) trades flat near Monday’s low at around 90.80 against the US Dollar (USD) during afternoon trading hours in India on Tuesday. The USD/INR pair trades broadly stable as strong dollar demand by Indian importers continues to support the downside, while the upside remains capped amid fears of the Reserve Bank of India’s (RBI) intervention.
The outlook of the Indian Rupee remains grim as the Indian stock market struggles to attract foreign investment despite the confirmation of a trade deal between the United States (US) and India.
So far in February, Foreign Institutional Investors (FIIs) have remained net sellers, and have pared their stake worth Rs. 2,345.69 crore. On Monday, FIIs sold shares worth Rs. 972.13 crore.
Globally, investors await the second round of talks between the US and Iran in Geneva during the day. Investors will closely track the US-Iran meeting to assess the outlook of the Oil price, with the assumption that an absence of a deal between both nations could prompt energy prices. This scenario will be unfavorable for the Indian Rupee, given that the economy relies heavily on imported oil to fulfill its energy needs.
Meanwhile, the sideways performance by the US Dollar ahead of the opening of US markets after an extended weekend is also keeping the USD/INR pair confined. During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat near 97.15.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.31% | -0.46% | 0.10% | 0.12% | -0.08% | 0.02% | |
| EUR | -0.11% | 0.20% | -0.56% | -0.02% | 0.03% | -0.18% | -0.09% | |
| GBP | -0.31% | -0.20% | -0.73% | -0.21% | -0.17% | -0.39% | -0.29% | |
| JPY | 0.46% | 0.56% | 0.73% | 0.54% | 0.57% | 0.34% | 0.46% | |
| CAD | -0.10% | 0.02% | 0.21% | -0.54% | 0.02% | -0.17% | -0.08% | |
| AUD | -0.12% | -0.03% | 0.17% | -0.57% | -0.02% | -0.20% | -0.10% | |
| INR | 0.08% | 0.18% | 0.39% | -0.34% | 0.17% | 0.20% | 0.09% | |
| CHF | -0.02% | 0.09% | 0.29% | -0.46% | 0.08% | 0.10% | -0.09% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Going forward, the major trigger for the US Dollar will be market expectations for the Federal Reserve’s (Fed) monetary policy outlook. According to the CME FedWatch tool, traders are confident that the Fed will not cut interest rates in the March and April monetary policy meetings.
Dovish Fed prospects have remained confined even as the US inflation has cooled in January. The data showed on Friday that the headline and core inflation dropped to 2.4% and 2.5%, on an annualized basis, respectively.
This week, major triggers for the US Dollar will be Federal Open Market Committee (FOMC) minutes of the January meeting and preliminary Q4 Gross Domestic Product (GDP) data. In the January policy meeting, the Fed held interest rates steady in the range of 3.50%-3.75%, and indicated that the bar for another interest rate cut is very high.
Technical Analysis: USD/INR wobbles around 20-day EMA
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USD/INR trades flat at around 90.9035 at the press time. Price sits marginally above the 20-day Exponential Moving Average (EMA) at 90.8822. The 20-day EMA has flattened after easing in recent sessions, pointing to consolidation.
The 14-day Relative Strength Index (RSI) at 51.19 is neutral, reflecting balanced momentum with a mild recovery from prior weakness.
As long as the price stays below the 20-day EMA, the door for further downside towards the psychological level of 90.00 remains open. On the upside, the price could rise to the February 2 low of 91.25 once it breaks decisively above the average.
(The technical analysis of this story was written with the help of an AI tool.)
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.
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.
