USD/INR loses traction amid softer Dollar, eyes on Middle East conflict
- Indian Rupee holds positive ground despite the sour market mood.
- Rising oil prices and Middle East geopolitical concerns might trigger risk-off sentiment and limit the Indian Rupee’s upside.
- Market players await the US S&P Global PMI data on Tuesday; India’s markets are closed for the Dussehra holidays.
Indian Rupee (INR) trades strongly against the US Dollar (USD) amid a decline in US Treasury bond yields on Tuesday. Moreover, the Reserve Bank of India’s (RBI) potential aggressive intervention last week lends some support to the Indian Rupee and acts as a headwind for the USD/INR pair. Nonetheless, the higher crude oil prices and escalating geopolitical tension in the Middle East might contribute to the risk-off mood and cap the upside of the Indian Rupee.
India’s markets are closed on Tuesday on account of the Dussehra holidays. Traders will monitor India’s Balance of Payments for the second quarter (Q2) on Thursday. Fed officials will not deliver any speeches this week due to the blackout period ahead of the FOMC meeting next week. In the meantime, traders will take cues from the US S&P Global PMI, the preliminary estimate of the US Q3 Gross Domestic Product (GDP), and the Core Personal Consumption Expenditure Index due later this week.
Daily Digest Market Movers: Indian Rupee climbs, the Dollar corrects to one-month lows
- The Chicago Fed National Activity Index rose to +0.02 in September versus -0.22 prior, suggesting the US economy is still some distance from a recession.
- RBI’s monetary policy committee stated the central bank would continue to focus on maintaining inflation at the target of 4%.
- MPC member Varma stated that a 1% real interest rate, adjusted for inflation, would consistently achieve India’s inflation target.
- Net foreign direct investment (FDI) in India fell to $2.99B in April–August this year from $18.03B last year, reflecting a slowing in global activity and a rise in repatriation.
- RBI Chief Shaktikanta Das said the central bank does intervene in the FX market, but only to prevent excessive volatility in the INR.
- Chief Das stated that RBI will monitor the evolving inflation dynamic amid the uncertainty surrounding food inflation.
- India’s Finance Minister will closely monitor the supply chain impact of the ongoing tensions in the Middle East.
- The RBI’s October bulletin suggested growth in India is expected to gain momentum for the remainder of the year.
- RBI sold a net total of $3.86B in the spot foreign exchange market in August, as per their monthly bulletin.
- India’s Wholesale Price Index (WPI) arrived at -0.26% YoY in September from 0.52% in August, below the market consensus of 0.50%.
Technical Analysis: Indian Rupee remains firm above the key support level of 83.00
The Indian Rupee extends its upside against the USD. The USD/INR pair remains well supported above the 83.00 psychological mark despite breaking the low of a prior range. A break below the 83.00 would drag the pair to 82.82 (low of September 12), en route to 82.65 (low of August 4). On the other hand, the immediate upside barrier is the support-turned-resistance at 83.15, followed by a high of October 4 at 83.30, and the all-time high around 83.45. In the meantime, the pair holds above the key 200-day Exponential Moving Average (EMA) on the daily chart, which supports further upside for the USD/INR pair in the short term.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.08% | -0.13% | -0.07% | -0.25% | -0.04% | 0.00% | 0.02% | |
| EUR | 0.09% | -0.04% | 0.04% | -0.16% | 0.05% | 0.09% | 0.10% | |
| GBP | 0.14% | 0.04% | 0.05% | -0.12% | 0.10% | 0.13% | 0.14% | |
| CAD | 0.06% | -0.03% | -0.07% | -0.19% | 0.02% | 0.07% | 0.07% | |
| AUD | 0.25% | 0.16% | 0.12% | 0.18% | 0.21% | 0.25% | 0.27% | |
| JPY | 0.03% | -0.06% | -0.10% | -0.02% | -0.22% | 0.01% | 0.04% | |
| NZD | 0.01% | -0.07% | -0.12% | -0.04% | -0.24% | -0.02% | 0.02% | |
| CHF | -0.01% | -0.12% | -0.14% | -0.06% | -0.24% | -0.04% | -0.01% |
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).
RBI FAQs
The role of the Reserve Bank of India (RBI), in its own words, is “..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at eys levels, and uses derivatives to hedge its positions.