USD/INR holds positive ground, all eyes on RBI MPC meeting
- Indian Rupee loses ground on the renewed US Dollar demand.
- India’s S&P Global Services PMI for November fell to 56.9 vs 58.4 prior, worse than the 58.0 expected.
- The Reserve Bank of India (RBI) is likely to maintain the repo rate unchanged at 6.5% at its December meeting.
Indian Rupee (INR) edges lower on Wednesday on the firmer US Dollar (USD). According to the “Global Credit Outlook 2024” by S&P, India is projected to be the fastest-growing major economy in the next three years. S&P forecast India’s growth of 7% in the 2026–27 fiscal year. Nevertheless, the critical obstacle lies in determining whether the nation can effectively evolve into the next major global manufacturing hub.
On Tuesday, India’s S&P Global Services Purchasing Managers’ Index (PMI) for November came in at 56.9 from 58.4 in October, below the market consensus of 58.0. The figure registered the slowest pace of growth since November 2022, but the index remained firm above the 50-mark threshold that separates growth from contraction.
The Reserve Bank of India (RBI) will schedule its three-day Monetary Policy Committee (MPC) meeting starting on Wednesday. The markets anticipate the central bank will maintain the status quo on the repo rate, leaving it unchanged at 6.5% due to the upbeat GDP growth and the easing trend of core inflation.
Daily Digest Market Movers: Indian Rupee remains sensitive to global factors and uncertainties
- Indian markets are sustaining a rally fueled by an improving interest rate outlook in the US, moderate oil price, resilient domestic macroeconomic data, renewed foreign inflows, and growing optimism about policy continuity in 2024 after the state assembly election results.
- India’s stock market value surpassed $4 trillion for the first time, marking a key milestone for the world’s fifth-biggest equity market.
- S&P Global India Services PMI declined to 56.9 in November from 58.4 in October, below market expectations of 58.0.
- The RBI is likely to sell the US Dollar near 83.38–83.39 levels to cap further depreciation in the Indian Rupee, per Reuters.
- As core CPI inflation moderated to 4.5% YoY and CPI inflation moderated to 4.87% YoY on October 23, analysts anticipate that the RBI will maintain the policy repo rate at its December meeting.
- RBI Governor Shaktikanata Das said that headline inflation has moderated, but the Indian economy remains sensitive to overlapping food price shocks caused by global factors and adverse weather events.
- US ISM Services PMI rose to 52.7 in November from 51.8 in the previous reading, better than the market expectation of 52.0.
- JOLTS Job Openings declined by 617,000 to 8.73M in October, falling to their lowest level since March 2021.
- Fed futures are now pricing that the Fed is done hiking rates and could start cutting policy rates as soon as March or May.
Technical Analysis: Indian Rupee’s positive stance remains in place
Indian Rupee trades weaker on the day. The USD/INR pair has traded within a familiar multi-month-old trading band of 82.80–83.40. Technically, the pair’s outlook remains constructive as it holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. This bullish momentum is reinforced by the 14-day Relative Strength Index (RSI), which remains above the 50.0 midpoint, suggesting that the path of least resistance is to the upside.
The USD/INR first resistance level is located at the upper boundary of the trading range of 83.40. A decisive break above 83.40 could pave the way for a recovery toward the year-to-date (YTD) high of 83.47. Further north, the next hurdle will emerge at a psychological round figure of 84.00.
On the downside, the 83.00 psychological mark is the key support level for the pair. A breach of this level could drag prices toward the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.87% | 0.79% | 0.04% | 1.03% | 0.10% | -0.37% | -0.27% | |
| EUR | -1.90% | -1.08% | -1.85% | -0.85% | -1.79% | -2.28% | -2.17% | |
| GBP | -0.80% | 1.07% | -0.75% | 0.22% | -0.72% | -1.21% | -1.06% | |
| CAD | -0.04% | 1.82% | 0.76% | 1.00% | 0.06% | -0.41% | -0.32% | |
| AUD | -1.03% | 0.84% | -0.24% | -1.01% | -0.94% | -1.41% | -1.29% | |
| JPY | -0.11% | 1.76% | 0.69% | -0.07% | 0.90% | -0.47% | -0.37% | |
| NZD | 0.39% | 2.22% | 1.17% | 0.41% | 1.39% | 0.47% | 0.10% | |
| CHF | 0.26% | 2.12% | 1.05% | 0.29% | 1.26% | 0.36% | -0.09% |
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).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.