USD/INR holds steady as traders await Fedspeak

Vaseline2 weeks ago

0 3 minutes read

USD/INR holds steady as traders await Fedspeak

Indian rupee settles in Thursday’s Asian session.
An increase in Chinese yuan and USD sales from local importers could boost the INR.
Investors will monitor the final annual US Q2 GDP data and Fedspeak on Thursday.

The Indian Rupee (INR) is trading flat on Thursday. US dollar (USD) sales from local corporates, foreign inflows of Indian stocks and bonds and a stronger Chinese yuan could support the local currency. However, rising crude oil prices or the risk-adverse environment could impact the INR and help limit the pair’s losses.

Traders will take more cues from speeches by US Federal Reserve (Fed) officials on Thursday, including Chairman Jerome Powell. Any hints of another 50 basis point rate cut by the Fed in November could undermine the USD against the INR. Final annualized US Gross Domestic Product (GDP) for the second quarter (Q2) will be released later in the day. On Friday, the Price Index for Personal Consumption Expenditures (PCE) will be in the spotlight.

Daily Digest Market Movers: Indian rupee remains firm on US dollar selling by importers

The Asian Development Bank (ADB) said on Wednesday that it expects India’s economy to grow at 7.0 percent in fiscal 2025 and 7.2 percent in fiscal 2026, maintaining its April growth forecast.
Moody’s Analytics noted that the slowdown in the Indian economy will drag down APAC growth in 2025 as India’s economy is projected to grow by 6.5% in 2025, up from around 7.1% for 2024.
Fed Governor Adriana Kugler said on Wednesday that she “strongly supported” the central bank’s decision last week, adding that it would be appropriate to cut rates further if inflation continues to fall as expected.
US new home sales fell 4.7% on Monday to 716,000 in August from a revised 751,000 in July, the Commerce Department reported on Wednesday. This figure came in better than expectations.
The price index for personal consumption expenditures (PCE) is expected to show an increase of 2.3% from last year in August, while core PCE is expected to increase by 2.7% in the same reporting period.

Technical Analysis: USD/INR bearishness remains in play

The Indian rupee trades on a flat note on the day. According to the daily chart, the USD/INR pair is maintaining the negative outlook below the key 100-day exponential moving average (EMA). The 14-day Relative Strength Index (RSI) is below the median line near 38.35, supporting sellers for now.

Sustained bearish vibrations could drag USD/INR down to 83.44, the low since September 23. A break below this level could tempt sellers to jump in and expose 83.00, representing the psychological level and May 24 low.

In the bullish case, a decisive break above the 100-day EMA at 83.62 could see a rise in the next upside targets near the support-turned-resistance level at 83.75. Further north, the next resistance level appears at 84.00.

Frequently Asked Questions about 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 done in USD – and the level of foreign investment are all influential. Direct intervention of the Reserve Bank of India (RBI) in the foreign exchange markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are other major influencing factors on the rupee.

The Reserve Bank of India (RBI) actively intervenes in the foreign exchange markets to maintain a stable exchange rate to help facilitate trade. In addition, the RBI is trying to maintain the inflation rate at the target of 4% by adjusting interest rates. Higher interest rates usually strengthen the rupee. This is due to the role of “carry trade” where investors borrow in countries with lower interest rates so that they place their money in countries that offer relatively higher interest rates and profit from the difference.

Macroeconomic factors that influence the value of the rupee include inflation, interest rates, the rate of economic growth (GDP), trade balance and foreign investment flows. A higher growth rate can lead to more investment abroad, increasing demand for the rupee. A less negative trade balance will ultimately lead to a stronger rupee. Higher interest rates, especially real rates (interest rates minus inflation) are also positive for the rupee. A risk-on environment may lead to higher foreign direct and indirect investment (FDI and FII) inflows, which also benefits the rupee.

Higher inflation, especially if it is comparatively higher than India’s, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, resulting in more rupees being sold to buy foreign imports, which is negative for the rupee. 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 for lower inflation.

Vaseline2 weeks ago

0 3 minutes read

Daily Digest Market Movers: Indian rupee remains firm on US dollar selling by importers

Technical Analysis: USD/INR bearishness remains in play

Frequently Asked Questions about the Indian Rupee

Vaseline

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