USD/INR trades softer following Indian PMI data
- Indian Rupee recovers some lost ground on the softer US Dollar.
- Indian HSBC Manufacturing PMI improved to 59.2 vs. 56.9 prior; Services PMI eased to 60.3 vs. 60.6 previously.
- Market players await the Indian HSBC PMI and US S&P Global PMI data on Thursday.
Indian Rupee (INR) trades on a stronger note on Thursday amid the decline of the US Dollar (USD). India’s manufacturing activity continued to improve in March, with the HSBC Manufacturing Purchasing Managers’ Index (PMI) coming in at 59.2 from the previous reading of 56.9. The Services PMI eased to 60.3 in March from 60.6 in the previous reading. The INR remains firm after the mixed Indian PMI data.
Furthermore, the dovish comments from Fed Chair Jerome Powell during the press conference have exerted some selling pressure on the Greenback and created a headwind for the USD/INR pair. Moving on, traders will keep an eye on the preliminary S&P Global PMI for March, the weekly Initial Jobless Claims, and Existing Home Sales, due later on Thursday.
Daily Digest Market Movers: Indian Rupee stays firm amid global influences
- Krishnamurthy Venkata Subramanian, India’s executive director at the International Monetary Fund (IMF), stated on Wednesday that India needs to grow at 8% on a sustained basis to generate sufficient jobs to reduce poverty and inequality.
- The Reserve Bank of India (RBI) has projected GDP growth for the next financial year at 7%, based on improved household consumption and an upturn in the private capex cycle.
- The Fed held the rate steady at 5.25–5.50% at its March meeting on Wednesday, with the median dot plot for 2024 unchanged from the 75 basis points (bps) of cuts shown in the December projections.
- Fed Chair Jerome Powell noted during the press conference that strong labour market data wouldn’t deter the central bank from cutting rates. The Fed will wait for more evidence that inflation is sustainably moderating toward its 2% target.
- Investors have priced in a 75% odds that the Fed will start cutting the rate in the June meeting, according to the CME FedWatch Tool.
Technical Analysis: Indian Rupee remains capped within a long-term trading range
Indian Rupee trades strongly on the day. USD/INR faces rejection near the upper boundary of the descending trend channel and remains stuck within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023.
In the near term, the bullish outlook of USD/INR remains intact as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is confirmed by the 14-day Relative Strength Index (RSI), which lies above the 50.0 midline, suggesting that further upside looks favorable.
The key upside barrier for the pair will emerge near the upper boundary of the descending trend channel at 83.15. A bullish breakout above this level could draw in USD/INR bulls and push the pair back to a high of January 2 at 83.35, followed by the 84.00 psychological level.
On the flip side, the first downside target is seen at the resistance-turned-support level at the 83.00 mark. Any follow-through selling below 83.00 could extend its downswing to a low of March 14 at 82.80. Further south, the next contention level is located at the lower limit of the descending trend channel at 82.60. A breach of this level might drag USD/INR to a low of August 23 at 82.45.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.17% | 0.09% | 0.00% | 0.10% | 2.12% | 1.16% | 0.80% | |
| EUR | -0.17% | -0.07% | -0.18% | -0.08% | 1.95% | 0.99% | 0.63% | |
| GBP | -0.08% | 0.09% | -0.10% | -0.01% | 2.03% | 1.06% | 0.68% | |
| CAD | 0.00% | 0.19% | 0.11% | 0.10% | 2.12% | 1.16% | 0.80% | |
| AUD | -0.08% | 0.08% | 0.00% | -0.09% | 2.03% | 1.09% | 0.69% | |
| JPY | -2.17% | -1.98% | -2.06% | -2.18% | -2.05% | -0.97% | -1.37% | |
| NZD | -1.16% | -1.00% | -1.07% | -1.18% | -1.09% | 0.97% | -0.38% | |
| CHF | -0.79% | -0.62% | -0.70% | -0.80% | -0.69% | 1.34% | 0.37% |
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.