USD/INR struggles to gains amid multiple challenges
- Indian Rupee remains relatively quiet ahead of the FOMC meeting.
- A pullback in US Treasury bond yields and lower oil prices lift the Indian Rupee on Tuesday.
- Federal Open Market Committee’s (FOMC) interest rate decision will be closely watched by traders.
Indian Rupee (INR) trades flat on Tuesday amid multiple challenges. A pullback in US Treasury bond yields and lower oil prices lift the INR on the day. Nonetheless, the equity outflows might exert pressure on the INR as overseas investors sold $1.67B in Indian equities in October. Additionally, the challenges from the Middle East geopolitical tension might boost safe-haven assets like the Greenback and act as a tailwind for the USD/INR pair.
Investors will monitor India’s Fiscal Deficit and Infrastructure Output data for September on Tuesday. The spotlight this week will be the highly-anticipated Federal Open Market Committee’s (FOMC) interest rate decision on Wednesday. The markets anticipate the central bank to leave the interest rate unchanged at its November meeting.
Daily Digest Market Movers: Indian Rupee remains sensitive to geopolitical uncertainty
- Market players will monitor whether the RBI starts selling bonds via open market operations (OMO) this week as liquidity improves.
- India’s foreign exchange reserves declined by $2.36B to $583.53B for the week ending October 20, according to the RBI.
- The US Dallas Fed Manufacturing Index fell to -19.2 in October from -18.1 drop in September.
- The US Core Personal Consumption Expenditure Index (PCE) arrived at 3.7% YoY in September from 3.8% in the previous reading, matching the market expectation, the headline PCE came in at 3.4% YoY vs the estimation of 3.4%.
- The Michigan Consumer Confidence Index improved to 63.8, better than expected.
- UoM inflation expectations for a one-year period are expected to grow by 4.2%, while for a five-year period are expected to remain steady at 3.0%.
- Foreign investors sold $1.67B in Indian equities in October, which might weigh on the Indian Rupee.
- RBI will continue to keep an eye on maintaining inflation at the 4% target.
- RBI forecasted that India’s GDP would grow at a 6.5% annual rate in the current fiscal year.
- The International Monetary Fund (IMF) revised up its forecast growth rate for India to 6.3% in October.
- India’s Wholesale Price Index (WPI) for September, a gauge of inflation, dropped -0.26% YoY versus 0.52% prior, below the market consensus of 0.50%.
Technical Analysis: The Indian Rupee trades sideways with a slight negative bias
The Indian Rupee trades around a flatline on the day. The USD/INR pair remains confined within a range of 83.00–83.35. The upward outlook of USD/INR remains intact as the pair holds above the 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.
Any decisive follow-through buying above the upper boundary of the trading range of 83.35 will see a rally to year-to-date (YTD) highs of 83.45. Further north, the next upside barrier at a psychological round mark at 84.00. On the flip side, the key support level is seen at 83.00, representing the confluence of a low of October 20 and a round mark. A breach below the 83.00 mark could see a drop to 82.82 (low of September 12), en route to 82.65 (low of August 4).
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.16% | 0.18% | 0.12% | 0.35% | 0.68% | 0.20% | -0.02% | |
| EUR | -0.17% | 0.02% | -0.01% | 0.18% | 0.52% | 0.03% | -0.17% | |
| GBP | -0.18% | -0.04% | -0.04% | 0.14% | 0.49% | 0.02% | -0.20% | |
| CAD | -0.13% | 0.06% | 0.05% | 0.22% | 0.56% | 0.07% | -0.14% | |
| AUD | -0.35% | -0.17% | -0.14% | -0.18% | 0.34% | -0.13% | -0.35% | |
| JPY | -0.68% | -0.51% | -0.49% | -0.57% | -0.35% | -0.48% | -0.69% | |
| NZD | -0.19% | -0.03% | -0.01% | -0.04% | 0.13% | 0.49% | -0.23% | |
| CHF | 0.02% | 0.18% | 0.20% | 0.15% | 0.34% | 0.70% | 0.22% |
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).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.