USD/INR extends its upside ahead of Fed Powell’s speech
- Indian Rupee loses traction on Friday due to the softer USD, and lower US bond yields.
- The positive outlook in the Indian economy might boost the INR and cap the pair’s upside.
- Investors await Fed Chair Jerome Powell’s speech on Friday for fresh impetus.
Indian Rupee (INR) weakens on Friday amid the rise of the US dollar (USD) and higher US Treasury bond yields. According to the HSBC Flash India PMI, India’s business activity ended the fiscal year on a good note, expanding at its fastest pace in eight months in March. This improvement in data suggests India is likely to continue its position as the fastest-growing major economy, which might boost the INR and cap the upside of the pair.
Investors will take more cues from Fed Chair Jerome Powell’s speech on Friday. Next week, attention will shift to the US Gross Domestic Product Annualized (GDP) for the fourth quarter (Q4), which is forecast to remain steady at 3.2%.
Daily Digest Market Movers: Indian Rupee remains vulnerable amid the uncertainties
- India’s Flash HSBC Manufacturing Purchasing Managers’ Index (PMI) came in at 59.2 versus 56.9 prior. The Services PMI arrived at 60.3 in March, versus 60.6 in the previous reading.
- The US S&P Global Manufacturing PMI rose to 52.5 in March from 52.2 in February, above the estimation of 51.7. The Services PMI eased to 51.7 in March from the previous reading of 52.3. The Composite PMI arrived at 52.2 in March versus 52.5 prior.
- The US weekly Initial Jobless Claims for the week ending March 15 dropped 2,000 to 210K from 212K in the previous week.
- 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 said on Wednesday that the upside surprises on US inflation data in January and February haven’t changed the overall story that inflation is heading down gradually on a somewhat bumpy road.
Technical Analysis: Indian Rupee will likely resume its bearish trend on a daily close above a longer-term range
Indian Rupee trades weaker on the day. USD/INR breaks above a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023. A daily close above the latter will confirm the positive outlook of the pair in the long term.
In the near term, USD/INR keeps the bullish vibe unchanged as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. However, the overbought RSI condition indicates that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.
The immediate resistance level will emerge near a high of January 2 at 83.35. Further north, the pair might attract some buyers to an all-time high of 83.49, followed by the 84.00 psychological level. On the downside, the key contention level is located near the 100-day EMA and round figure of the 83.00 mark. The additional downside filter to watch is a low of March 14 at 82.80, en route to the lower limit of the descending trend channel 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 strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.44% | 0.80% | 0.14% | 0.76% | 2.16% | 1.76% | 1.62% | |
| EUR | -0.43% | 0.38% | -0.30% | 0.31% | 1.73% | 1.33% | 1.19% | |
| GBP | -0.80% | -0.38% | -0.68% | -0.07% | 1.36% | 0.95% | 0.80% | |
| CAD | -0.15% | 0.28% | 0.64% | 0.60% | 2.01% | 1.61% | 1.47% | |
| AUD | -0.76% | -0.31% | 0.05% | -0.61% | 1.42% | 1.02% | 0.88% | |
| JPY | -2.21% | -1.76% | -1.38% | -2.05% | -1.47% | -0.44% | -0.55% | |
| NZD | -1.80% | -1.34% | -0.96% | -1.64% | -1.03% | 0.41% | -0.14% | |
| CHF | -1.65% | -1.20% | -0.84% | -1.52% | -0.89% | 0.54% | 0.13% |
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.