USD/INR loses traction amid thin holiday trading
- Indian Rupee holds positive ground despite the mild recovery of the USD.
- RBI’s Das said that India is one of the world’s fastest-growing major economies with a rising potential growth profile.
- The December’s US Chicago Purchasing Managers’ Index (PMI) is due on Friday.
Indian Rupee (INR) trades on a positive note on Friday despite a modest rebound in the US Dollar (USD). According to the Financial Stability Report (FSR), the Indian economy and financial system remain resilient, bolstered by robust macroeconomic fundamentals, stable financial institution balance sheets, moderating inflation and an improving external sector position.
RBI Governor Shaktikanta Das said that India is one of the fastest-growing major economies in the world with a rising potential growth profile. Governor Das further stated that the central bank will act early and decisively to prevent any buildup of risks to the Indian economy.
The market has another quiet session as traders enter holiday mode. The Chicago Purchasing Managers’ Index (PMI) for December will be released from the US docket later on Friday, which is expected to decline from 55.8 to 51.0.
Daily Digest Market Movers: Indian Rupee shows resilience amid global factors and uncertainties
- The Gross Non-Performing Asset (GNPA) ratio of Indian banks improved further in the second quarter of the current fiscal year, easing to a new decadal low of 3.2%.
- India’s current account deficit narrowed to $8.3 billion in the second quarter of 2023–24.
- Fitch Ratings forecast India to be the world’s fastest-growing country, with resilient GDP growth of 6.5% during fiscal 2024–25.
- According to the CEBR, India is set to become the world’s third-biggest by 2032 and will eventually surpass China and the United States to become the “world’s largest economic superpower” by 2100.
- US Initial Jobless Claims for the week ending December 23 rose to 218,000, above the market consensus of 210,000. Continuing Claims came in at 1.875 million, the highest level in four weeks.
- US Pending Home Sales remained flat in November, below the market estimation of a 1% increase.
Technical Analysis: Indian Rupee keeps the longer-term range theme unchanged
Indian Rupee trades stronger on the day. The USD/INR pair remains stuck in a multi-month-old trading band between 82.80 and 83.40. Technically, the path of least resistance for USD/INR is to the upside as the pair holds above the key 100-period Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) turns back below the 50.0 midpoint, suggesting that further decline cannot be ruled out.
Any follow-through selling below the key support level at 83.00 will pave the way to 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. A decisive break below 82.80 will see a drop to a low of August 11 at 82.60. On the upside, the first upside barrier is seen near the upper boundary of the trading range at 83.40. The next hurdle to watch is the year-to-date (YTD) high of 83.47, en route to the 84.00 psychological mark.
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% | -0.04% | -0.05% | -0.27% | -0.04% | -0.23% | -0.12% | |
| EUR | 0.09% | 0.05% | 0.04% | -0.17% | 0.05% | -0.14% | -0.04% | |
| GBP | 0.04% | -0.04% | -0.01% | -0.23% | 0.00% | -0.20% | -0.08% | |
| CAD | 0.05% | -0.03% | 0.01% | -0.22% | 0.00% | -0.18% | -0.06% | |
| AUD | 0.27% | 0.19% | 0.23% | 0.22% | 0.22% | 0.04% | 0.16% | |
| JPY | 0.04% | -0.04% | 0.00% | -0.01% | -0.23% | -0.20% | -0.08% | |
| NZD | 0.23% | 0.15% | 0.19% | 0.17% | -0.04% | 0.19% | 0.12% | |
| CHF | 0.11% | 0.05% | 0.08% | 0.07% | -0.15% | 0.12% | -0.12% |
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.