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USD/INR tumbles on possible RBI’s intervention, FIIs continue to offload Indian equities

  • The Indian Rupee jumps to near 88.10 against the US Dollar on hopes that the RBI has intervened in currency markets.
  • The IMF raised India’s GDP growth forecast for the current fiscal year to 6.6% despite US-India trade concerns.
  • Fed officials support more interest rate cuts amid downside labor market risks.

The Indian Rupee (INR) trades firmly against the US Dollar (USD) during afternoon trading hours in India on Wednesday. The USD/INR pair posts a fresh three-week low near 88.10 as the US Dollar extends its weakness, with Federal Reserve (Fed) dovish expectations returning under the spotlight.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% lower to near 98.85.

Apart from the weakness in the US Dollar, a report from Reuters has also confirmed the Reserve Bank of India’s (RBI) intervention into currency markets to restrict the USD/INR pair from passing its all-time high of around 89.10.

Indian central bank aggressively selling dollars to shore up rupee – traders, Reuters reported.

Meanwhile, the continuous outflow of foreign funds from the Indian stock market is expected to remain a key concern for the Indian Rupee. On Tuesday, Foreign Institutional Investors (FIIs) sold shares worth Rs. 1,508.53 crores in the Indian equity market. In the July-September period, FIIs sold equity shares worth Rs. 1,29,870.96 crores.

Overseas investors have been parting ways from the Indian secondary market due to ongoing trade tensions between the United States (US) and India over New Delhi's decision to purchase oil from Russia. In spite of US-India trade worries, the International Monetary Fund (IMF) has raised India’s growth target for the current fiscal year to 6.6%, up 0.2% from its prior forecast. The agency stated that India’s strong growth momentum would offset the impact of higher US import duties on Indian goods.

Meanwhile, China's Commerce Ministry has accused India over EV and battery subsidies, which it says that are hurting their interest. The ministry has also threatened to file a complaint to the World Trade Organization (WTO) if New Delhi doesn't fix the same, Reuters reported.

The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the strongest against the US Dollar.

USDEURGBPJPYCADAUDINRCHF
USD-0.20%-0.40%-0.57%-0.11%-0.55%-0.57%-0.25%
EUR0.20%-0.15%-0.39%0.07%-0.31%-0.34%-0.05%
GBP0.40%0.15%-0.22%0.26%-0.16%-0.18%0.16%
JPY0.57%0.39%0.22%0.43%0.02%0.01%0.41%
CAD0.11%-0.07%-0.26%-0.43%-0.44%-0.48%-0.10%
AUD0.55%0.31%0.16%-0.02%0.44%-0.09%0.31%
INR0.57%0.34%0.18%-0.01%0.48%0.09%0.40%
CHF0.25%0.05%-0.16%-0.41%0.10%-0.31%-0.40%

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: US Dollar weakens on firm Fed dovish bets

  • The US Dollar is weighed down by comments from Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, citing the need for further monetary policy expansion in the wake of escalating labor market risks.
  • On Tuesday, Fed’s Powell warned of softening job demand in a speech at the National Association for Business Economics (NABE) conference in Philadelphia, with economic growth remaining strong and inflation well above the desired 2% target.
  • “Economic activity data are surprising to the upside, creating some tension with the labor market data,” Powell said. He added that the interest rate cut announcement by the Fed in September was “justified” amid “rising risks to the job market”.
  • Separately, Fed Governor Michelle Bowman and Boston President Susan Collins also argued in favor of reducing interest rates further amid cooling job market conditions. “I continue to see two more cuts before the end of this year,” Bowman said, Reuters reported.
  • According to the CME FedWatch tool, traders see a 94.6% that the Fed will reduce interest rates by 50 basis points (bps) to 3.50%-3.75% in the remaining year.
  • Meanwhile, ongoing trade tensions between the US and China are also weighing on the US Dollar. The announcement from Beijing that it will begin charging additional port fees on ocean shipping firms, which move everything from holiday toys to crude oil, has escalated trade tensions. Market participants saw this as a response to fees charged by the US. Additionally, President Donald Trump said on Tuesday that Washington is considering terminating some trade ties with Beijing, including for cooking oil.

Technical Analysis: USD/INR slides to near 88.00

The Indian Rupee gains sharply to near 88.10 against the US Dollar in the opening trade on Wednesday. The USD/INR pair faces a sharp selling pressure after a breakdown of the three-week-long consolidation formed in a range between 88.75 and 89.10.

The near-term trend of the pair has become uncertain as tests below the 20-day Exponential Moving Average (EMA), which is around 88.69.

The 14-day Relative Strength Index (RSI) falls below 50.00, suggesting a shift in momentum on the downside in the near term.

Looking down, the September 17 low of 87.70 will act as key support for the pair. On the upside, the current all-time high of 89.12 will be a key barrier.

Author

Sagar Dua

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.

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