USD/INR trades around a flatline ahead of Indian Trade Balance, US PMI data
- Indian Rupee stands flat despite the softer US Dollar.
- India’s Wholesale Price Index (WPI) inflation emerged from the deflationary zone, rising to 0.26% in November.
- Investors await the Indian Trade Balance and the US S&P Global PMI report for fresh impetus.
Indian Rupee (INR) trades flat on Friday despite the USD weakness. The Wholesale Price Index, which measures India’s wholesale inflation, has entered positive territory for the first time since March 2023, according to data from the commerce ministry on Thursday. Inflationary pressures have been attributed to price rises in a variety of industries.
The Reserve Bank of India (RBI) Governor Shaktikanta Das said that the inflation figures may show an uptick in November and December due to food output pressures. Governor Das added that, taking into account these factors and the assumption of typical monsoons, CPI-based inflation is estimated at 5.4% for 2023–24, with Q3 at 5.6% and Q4 at 5.2%.
Market players will monitor the Indian Trade Balance and the US S&P Global Purchasing Managers’ Index (PMI), due later on Friday. The Manufacturing PMI is estimated to ease from 49.4 to 49.3, while the Services PMI is projected to drop from 50.8 to 50.6.
Daily Digest Market Movers: Indian Rupee remains vulnerable as inflation hits eight-month high
- India’s WPI Inflation rose by 0.26% YoY in November from a previous reading of 0.52%, above the forecast of 0.08%.
- India’s Wholesale Price Food Index came in at 4.69% YoY in November whereas the WPI Fuel Price Index arrived at -4.61% YoY in the same period.
- India’s WPI Manufacturing Inflation for November declined by 0.64% YoY from a 1.13% fall in October.
- India’s Consumer Price Index (CPI) climbed 5.55% YoY in November versus 4.87 %prior, worse than the expectation of 5.70%.
- The Asian Development Bank (ADB) forecasted India’s economy to expand 6.7% in Financial Year 2023–24, revised up from 6.3% in September.
- US Retail Sales came in better than the market expectation, growing 0.3% in November from a 0.2% decline in the previous reading.
- The US weekly Initial Jobless Claims arrived at 202K versus 221K prior. Continuing Claims rose by 20K to 1.876M.
- The Federal Reserve (Fed) maintained interest rates unchanged at the target range of 5.25%–5.5% in its December meeting, as widely expected.
Technical Analysis: The Indian Rupee keeps the positive stance unchanged
Indian Rupee trades on a flat note on the day. The USD/INR pair has remained stuck in a multi-month trading range of 82.80–83.40. Technically, USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. It’s worth noting that the 14-day Relative Strength Index (RSI) bounced off the 50.0 midline for the second time, indicating that bulls remain cautiously optimistic.
The first upside barrier is seen near the upper boundary of the trading range at 83.40. A break above 83.40 will see a rally to the year-to-date (YTD) high of 83.47, followed by the psychological mark of 84.00. On the downside, 83.00 will be the critical support level for USD/INR. Any follow-through selling will see a drop to 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. The next contention level will emerge near 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 Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -1.91% | -1.42% | -1.55% | -1.86% | -1.84% | -0.89% | -1.08% | |
| EUR | 1.87% | 0.47% | 0.34% | 0.05% | 0.06% | 0.99% | 0.82% | |
| GBP | 1.42% | -0.47% | -0.13% | -0.43% | -0.41% | 0.53% | 0.36% | |
| CAD | 1.53% | -0.35% | 0.13% | -0.30% | -0.26% | 0.66% | 0.47% | |
| AUD | 1.82% | -0.04% | 0.44% | 0.30% | 0.01% | 0.95% | 0.78% | |
| JPY | 1.81% | -0.04% | 0.43% | 0.28% | -0.02% | 0.96% | 0.76% | |
| NZD | 0.89% | -1.00% | -0.52% | -0.66% | -0.96% | -0.95% | -0.17% | |
| CHF | 1.07% | -0.83% | -0.36% | -0.50% | -0.79% | -0.77% | 0.17% |
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.