News & Analyses

USD/INR extends its downside ahead of US NFP data

  • Indian Rupee drifts higher on Friday amid the softer Greenback. 
  • The positive outlook in the Indian economy and capital inflows support the INR. 
  • Investors await the US ISM Services PMI and the employment data on Friday. 

Indian Rupee (INR) gains momentum on Friday as the cautious comments by the Federal Reserve (Fed) Chair Jerome Powell exert further selling pressure on the US Dollar (USD). Furthermore, the positive sentiment in the Indian equity markets and the inflow of foreign capital boost the INR and cap the pair’s upside. 

Market players will keep an eye on the US ISM Services PMI and the employment data for April, due on Friday. The Nonfarm Payrolls (NFP)  is estimated to show 243K job additions in the US economy, while the Unemployment Rate is projected to remain steady at 3.8% in April. The unexpected weakening in the labor market could warrant a rate cut from the Fed, which weighs on the Greenback. 

Daily Digest Market Movers: Indian Rupee remains strong amid the positive sentiment 

  • The HSBC final India Manufacturing Purchasing Managers’ Index (PMI) declined to 58.8 in April from a 16-year high of 59.1 in March.
  • FX intervention from the RBI in February was the lowest in six months, about one-eighth of the average monthly intervention from October to December, per Reuters. 
  • QuantEco Research economist, Vivek Kumar, said that pressures on the Indian Rupee eased in the January-March compared to October-December, reducing the magnitude of intervention. 
  • The Organisation for Economic Co-operation and Development (OECD) raised its growth forecast for India by 40 basis points (bps) to 6.6% for 2024-25. 
  • The Initial Jobless Claims in the US for the week ended April 27 remained unchanged at 208K, better than the expectation of 212K. 
  • The US Fed left interest rates unchanged on Wednesday and noted that it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are easing sustainably to its 2% target. 

Technical analysis: USD/INR keeps the bullish outlook in the longer term

The Indian Rupee trades weaker on the day. The constructive stance of USD/INR remains unchanged on the daily timeframe as the pair is forming an ascending triangle and holds above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) holds in the bullish territory around the 50 midline, indicating that further consolidation looks favorable for the time being. 

The confluence of the lower limit of the ascending triangle and the 100-day EMA at 83.15 act as an initial support level for USD/INR. A decisive break below this level will expose a low of January 15 at 82.78 and then pave the way to a low of March 11 at 82.65. On the upside, a high of May 1 at  83.50 will be the first upside target for the pair. A bullish breakout above the upper boundary of the ascending triangle of 83.71 will see a rally to the 84.00 psychological round mark. 


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.




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 Pound Sterling.

USD   -0.01% -0.08% -0.02% -0.03% 0.00% -0.05% -0.02%
EUR 0.02%   -0.05% 0.00% 0.01% 0.05% 0.00% -0.01%
GBP 0.07% 0.06%   0.06% 0.06% 0.09% 0.04% 0.05%
CAD 0.02% 0.00% -0.04%   0.00% 0.04% -0.01% 0.00%
AUD 0.03% 0.00% -0.05% 0.00%   0.04% -0.01% 0.00%
JPY -0.01% -0.04% -0.10% -0.06% -0.02%   -0.03% -0.05%
NZD 0.04% 0.00% -0.03% 0.03% 0.03% 0.05%   0.02%
CHF 0.02% 0.01% -0.05% 0.00% 0.00% 0.05% -0.02%  

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).


Source link

News & Analyses Analyses