USD/INR gains ground, US Jobless Claims loom
- Indian Rupee loses traction on the renewed US Dollar buying.
- The markets anticipate the Reserve Bank of India (RBI) to maintain the status quo on the repo rate, leaving it unchanged at 6.5%.
- Investors await the US weekly Jobless Claims on Thursday ahead of the RBI rate decision and US Nonfarm Payrolls.
Indian Rupee (INR) continue to trade on a negative note on Thursday amid the renewed US Dollar (USD) demand. The Reserve Bank of India’s (RBI) three-day monetary policy meeting began on Wednesday. RBI Governor Shaktikanta Das will announce the Monetary Policy Committee (MPC) decision on Friday.
The markets widely anticipate that RBI will maintain the interest rate unchanged at 6.50% for the fifth consecutive monetary policy meeting. The elevated inflation above the 4% target, the volatility of crude oil prices, and the concern about El Nino and agricultural output will keep the central bank on hold.
Investors will monitor the US weekly Jobless Claims, due later on Thursday. The highlight this week will be the RBI interest rate decision and the US employment data, including Nonfarm Payrolls and Unemployment Rate on Friday. The November Nonfarm Payrolls is estimated to rise by 185K, while the unemployment rate is expected to stay unchanged at 3.9%.
Daily Digest Market Movers: Indian Rupee trades weaker due to a slowdown in services sector growth
- Indian equities have seen inflows of more than $3 billion in December, according to National Securities Depository.
- India is on the path to becoming the world’s third-biggest economy by 2030, according to S&P Global Ratings’ latest report.
- India’s stock market value surpassed $4 trillion for the first time, fueled by moderate oil prices, resilient domestic macroeconomic data, renewed foreign inflows, and growing optimism about policy continuity in 2024 after the state assembly election results.
- S&P Global India Services PMI eased to 56.9 in November from 58.4 in October, below market consensus of 58.0.
- ADP private payrolls rose 103K in November from 106K in October, below the market estimation of 130K.
- Analysts anticipate the tightening cycle is now over and the Fed will hold interest rates until at least July, later than earlier thought, according to a Reuters poll.
Technical Analysis: Indian Rupee’s outlook remains constructive
Indian Rupee weakens on the day. The USD/INR pair remains in a familiar multi-month-old trading band of 82.80–83.40. According to the daily chart, USD/INR maintains a bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA). The upward momentum is supported by the 14-day Relative Strength Index (RSI), which remains above the 50.0 midpoint.
The first upside barrier will emerge at the upper boundary of the trading range of 83.40. The additional upside filter to watch is the year-to-date (YTD) high of 83.47. Further north, the next hurdle is seen at a psychological round mark of 84.00.
On the downside, the strong support is envisioned at the 83.00 psychological figure. A decisive break below 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. The next cushion is located at 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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.95% | 1.17% | 0.12% | 1.26% | -0.17% | 0.54% | 0.28% | |
| EUR | -1.99% | -0.80% | -1.88% | -0.70% | -2.15% | -1.43% | -1.72% | |
| GBP | -1.18% | 0.80% | -1.06% | 0.10% | -1.34% | -0.62% | -0.89% | |
| CAD | -0.11% | 1.84% | 1.05% | 1.16% | -0.27% | 0.44% | 0.18% | |
| AUD | -1.30% | 0.69% | -0.11% | -1.17% | -1.45% | -0.74% | -1.00% | |
| JPY | 0.15% | 2.12% | 1.33% | 0.28% | 1.43% | 0.73% | 0.46% | |
| NZD | -0.55% | 1.41% | 0.62% | -0.45% | 0.72% | -0.73% | -0.27% | |
| CHF | -0.27% | 1.67% | 0.88% | -0.18% | 0.98% | -0.46% | 0.26% |
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 key levels, and uses derivatives to hedge its positions.