USD/INR flat-lines ahead of Indian PMI data
- Indian Rupee trades sideways on Monday despite the stronger USD.
- Several polls showed the RBI would maintain the repo rate steady at 6.50% in the forthcoming meeting on Friday.
- Investors will closely watch the Indian March HSBC Manufacturing Purchasing Managers Index (PMI) data on Tuesday.
Indian Rupee (INR) trades on a flat note on Tuesday despite the firmer US Dollar (USD) following the upbeat US ISM Manufacturing PMI. The Reserve Bank of India (RBI) will schedule its first bi-monthly monetary policy meeting for Wednesday to Friday. Various polls indicate that the RBI will keep the repo rate steady at 6.50% in the upcoming meeting as it weighs robust domestic economic growth prospects amid sticky food inflation, while Fed officials hinted at potential rate cuts later this year. The high-for-longer rate narrative in India might lift the INR and create a tailwind for the USD/INR pair.
Looking ahead, market players will monitor India’s HSBC Manufacturing Purchasing Managers Index (PMI) data on Tuesday, which is projected to remain steady at 59.2 in March. All eyes will be on the RBI interest rate decision and the US March Nonfarm Payrolls on Friday.
Daily digest market movers: Indian Rupee remains flat amid uncertainties
- India’s Prime Minister Narendra Modi said on Monday that the RBI must prioritize the country's economic growth and also ensure the rupee is made more accessible and acceptable globally. ”
- India's GDP will be the fastest expanding among the G-20 countries by 2024. In the previous three quarters, India's GDP grew by 7.8% in Q1, 7.6% in Q2, and 8.4% in Q3.
- The US ISM Manufacturing PMI climbed to 50.3 in March from 47.8 in the previous reading, above the market consensus of 48.4. The reading registered the highest level since September 2022, with increased production and new orders,
- Investors have priced in nearly 61% odds of the Fed cutting rates by 25 basis points (bps) in June, up from 55.2 before the data release, according to the CME FedWatch Tool.
- Fed Chairman Jerome Powell said on Friday that recent US inflation data was in line with expectations and that the Fed's goal for the interest rate this year remained unchanged.
Technical analysis: USD/INR maintains a positive outlook in the longer term
Indian Rupee trades flat with mild losses on the day. USD/INR maintains a bullish bias in the longer term since the pair rose above a nearly four-month-old descending trend channel last week.
In the near term, USD/INR remains above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is supported by the 14-day Relative Strength Index, which lies above the 50 midline. This indicates more room for further upside.
A bullish break past a high of November 10, 2023, at 83.49 could spur a rally to an all-time high of 83.70 en route to 84.00 (psychological level). On the other hand, a break below the support level near a high of March 21 at 83.20 would sustain its bearish move to 83.00 (round mark, the 100-day EMA), followed by a low of March 14 at 82.80.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.01% | 0.00% | -0.06% | 0.08% | 0.05% | 0.01% | |
| EUR | -0.05% | -0.03% | -0.03% | -0.12% | 0.02% | 0.00% | 0.04% | |
| GBP | -0.03% | 0.03% | -0.01% | -0.09% | 0.04% | 0.02% | 0.00% | |
| CAD | -0.03% | 0.02% | 0.00% | 0.00% | 0.04% | 0.04% | 0.04% | |
| AUD | 0.06% | 0.10% | 0.09% | 0.01% | 0.14% | 0.13% | 0.15% | |
| JPY | -0.08% | -0.02% | -0.06% | -0.02% | -0.11% | -0.01% | 0.02% | |
| NZD | -0.06% | -0.01% | -0.03% | -0.03% | -0.11% | 0.02% | -0.01% | |
| CHF | -0.09% | -0.05% | -0.06% | -0.06% | -0.15% | -0.02% | -0.02% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Indian Rupee FAQs
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 conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. 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 of lower inflation.