USD/INR extends rally ahead of India/US PMI data

Vaseline2 weeks ago

0 3 minutes read

USD/INR extends rally ahead of India/US PMI data

The Indian rupee softens in the Asian session on Tuesday.
Renewed USD demand, volatile crude oil prices, external fund outflows undermine INR.
On Tuesday, HSBC India Manufacturing PMI and US ISM Manufacturing PMI for September will be in focus.

The Indian Rupee (INR) is trading in negative territory for the third consecutive day on Tuesday. The decline in the local currency is pressured by strong demand for US dollars (USD) from foreign banks. In addition, volatile crude oil prices amid rising tensions in the Middle East and outflow of foreign funds are contributing to the decline in the INR.

However, anticipation of a further interest rate cut by the Federal Reserve could limit the upside for the pair. Investors will be watching the US ISM Manufacturing Purchasing Managers (PMI) index due on Tuesday. The Fed’s Raphael Bostic and Lisa Cook are also scheduled to speak. On the Indian front, the HSBC India Manufacturing PMI for September will be released.

Daily Digest Market Movers: Indian rupee remains sensitive to global factors

“The rupee, after experiencing a decent appreciation, has started to move back towards its typical range. This shift is driven by end-of-month dollar demand from importers coupled with active currency management by the RBI,” said Amit Pabari, Managing Director at FX CR Forex Consultancy.
India’s current account balance moved into a deficit of USD 9.7 billion in the April-June quarter (Q1) of 2024-25 (FY25), accounting for 1.1% of Gross Domestic Product (GDP), according to the Reserve Bank of India (RBI). .
Fed Chairman Jerome Powell said Monday that the recent half-percentage-point interest rate cut should not be interpreted as a sign that future moves will be as aggressive. Powell added that further rate cuts are on the way, although their size and pace would depend on how the economy plays out.
Powell also said the Fed’s current focus is to support a largely healthy economy and labor market, rather than bailing out a struggling economy or preventing a recession.
Interest rate futures had a nearly 35.4% chance of a half-point cut in November, compared to a 64.6% chance of a quarter-point cut, according to CME’s FedWatch tool.

Technical Analysis: USD/INR bullish outlook prevails

The Indian rupee is trading on a weaker note on the day. The USD/INR pair is maintaining the bullish vibe in the daily time frame as the price is holding above the 100-day exponential moving average (EMA). However, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) is hovering around the midline, indicating neutral momentum.

The psychological mark of 84.00 seems to be a tough nut to crack for USD/INR bulls. A decisive break above this level could lead to a rise to 84.15, the August 5 high. The next upside barrier is seen at 84.50.

On the other hand, the 100-day EMA at 83.62 acts as an initial support level for USD/INR. Extended losses could pave the way to 83.00, representing the psychological level and May 24 low.

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 may lead to more investment abroad, pushing 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 sensitive to global factors

Technical Analysis: USD/INR bullish outlook prevails

Frequently Asked Questions about the Indian Rupee

Vaseline

Related Articles

AT&T Pays to Resolve 911 Outage Investigation

I paid for my own engagement ring; My husband picked out my wedding dress

KCM Investment Advisors LLC increases its position in Texas Instruments Incorporated (NASDAQ:TXN)

Gold prices hit record high as rate cuts persist by Investing.com