- The Indian rupee weakened due to the strength of the US dollar.
- The Reserve Bank of India (RBI) is likely to maintain its policy stance at its December meeting.
- Weekly U.S. new jobless claims numbers will be released later Thursday.
The Indian rupee (INR) traded weakly on Thursday as demand for the US dollar (USD) recovered. Nevertheless, the market believes that US interest rates may have peaked and expects the Federal Reserve to ease policy rates next year. With the Fed likely to cut rates in mid-2024, US Treasury yields could fall, which could be positive for INR. The Reserve Bank of India (RBI) is likely to maintain its policy stance at its December meeting after October inflation data fell within the central bank’s target range of 2-6% for the second month in a row. be.
Investors will focus on weekly new U.S. unemployment claims to be released later on Thursday. Meanwhile, the Indian rupee remains vulnerable to rising oil prices as India is the world’s third largest oil consumer.
Daily Digest Market drivers: Indian rupee remains sensitive to rising oil prices
- India’s trade deficit narrowed to $31.46 billion in October from $19.37 billion in September.
- India’s exports in October rose 6.2% to $33.57 billion from $34.47 billion in September, while imports were $65.03 billion from $53.84 billion the previous month. Rising global oil prices have increased the country’s import costs.
- India’s headline retail price inflation rate fell to 4.9% in October from 5% in the previous month, the lowest level in four months.
- India’s wholesale price index (WPI) inflation rate was -0.52% from -0.26% previously, below the market consensus of -0.20%.
- India’s consumer price index (CPI) rose 4.87% year-on-year in October, up from 5.02% in September and higher than market expectations of 4.80%.
- The Reserve Bank of India (RBI) is likely to maintain its hawkish stance at its December monetary policy meeting.
- The US Producer Price Index (PPI) fell 0.5% month-on-month in October, after rising 0.4% in September. The annual PPI figure was 1.3% during the same period, up from 2.2% last time.
- U.S. retail sales fell 0.1% in October, contrary to expectations of a 0.3% decline, compared to a 0.9% increase previously.
- Federal funds futures currently price in no U.S. interest rate hikes this quarter and a 50% chance of a rate cut by May 2024.
Technical analysis: Indian rupee maintains bearish stance
The Indian rupee remained weak on this day. The USD/INR pair has been trading within a wider trading range of 82.80-83.35 since September. According to the daily chart, USD/INR is above the important 100-day exponential moving average (EMA), maintaining a bullish outlook.
The immediate resistance level for this pair is seen near the upper end of the trading range at 83.35. If there is follow-through buying, it will rise to a year-to-date (year-to-date) high of 83.47. Further north, the next target to watch is the psychological round number of 84.00.
On the downside, the September 12 low of 82.80 serves as the first support level for USD/INR. A decisive break below 82.80 would extend losses to the August 11 low of 82.60. The next level of contention is near his August 24th low of 82.37.
USD price for the past 7 days
The table below shows the percentage change of the US dollar (USD) against major listed currencies over the past 7 days. The US dollar was the strongest against the Japanese yen.
| USD | EUR | GBP | CAD | australian dollar | JPY | new zealand dollar | Swiss franc | |
| USD | -1.18% | -0.89% | -0.72% | -1.16% | 0.32% | -1.25% | -1.21% | |
| EUR | 1.19% | 0.32% | 0.48% | 0.05% | 1.51% | -0.04% | -0.01% | |
| GBP | 0.90% | -0.30% | 0.19% | -0.27% | 1.22% | -0.36% | -0.31% | |
| CAD | 0.72% | -0.47% | -0.15% | -0.44% | 1.04% | -0.54% | -0.49% | |
| australian dollar | 1.17% | -0.01% | 0.30% | 0.45% | 1.48% | -0.09% | -0.04% | |
| JPY | -0.32% | -1.51% | -1.22% | -1.05% | -1.50% | -1.59% | -1.55% | |
| new zealand dollar | 1.23% | 0.09% | 0.35% | 0.55% | 0.09% | 1.57% | 0.05% | |
| Swiss franc | 1.20% | 0.04% | 0.34% | 0.50% | 0.06% | 1.52% | -0.02% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move along the horizontal line to Japanese Yen, the percentage change displayed in the box represents EUR (base)/JPY (estimate).
Frequently Asked Questions about Indian Rupees
The Indian Rupee (INR) is one of the currencies that is most sensitive to external factors. The price of oil (the country is heavily dependent on oil imports), the value of the US dollar (most trade is done in US dollars), and the level of foreign investment all play a role. Direct intervention by the Reserve Bank of India (RBI) in the foreign exchange market to maintain exchange rate stability and the level of interest rates set by the RBI are factors that have an even greater impact on the rupee.
The Reserve Bank of India (RBI) actively intervenes in the foreign exchange market to maintain stable exchange rates and facilitate trade. Additionally, the RBI seeks to maintain inflation at its target of 4% by adjusting interest rates. Typically, when interest rates rise, the rupee appreciates. This is due to the role of the “carry trade,” in which investors borrow in a country with low interest rates, place their funds in a country with relatively high interest rates, and profit from the difference.
Macroeconomic factors that influence the value of the rupee include inflation, interest rates, economic growth rate (GDP), trade balance, and inflows from foreign investments. Higher growth rates could lead to more foreign investment and higher demand for the rupee. A reduction in the negative trade balance will ultimately lead to a stronger rupee. Rising interest rates, especially real interest rates (interest rates minus inflation), are also positive for the rupee. The risk-on environment is likely to lead to higher foreign direct and indirect investment (FDI and FII) inflows, which will also benefit the rupee.
A rise in inflation, especially when it is relatively high compared to India’s peers, is generally negative for a currency as it reflects a fall in the value of the currency due to oversupply. Inflation also increases export costs and more rupees are sold to buy foreign imports, making the rupee negative. At the same time, higher inflation usually leads to a hike in Reserve Bank of India (RBI) interest rates, which could be positive for the rupee as it increases demand from foreign investors. The opposite effect applies when the inflation rate falls.
