- Indian Rupee remains strong on Thursday amid a softer USD.
- Indian HSBC Manufacturing dropped to 58.8 in April vs. 59.5 expected.
- The Fed Chair Powell pushed back against the possibility of rate hikes, exerting selling pressure on the USD.
- Investors will monitor India’s HSBC Manufacturing PMI for April.
Indian Rupee (INR) recovers some lost ground on Thursday amid the weaker US Dollar (USD). India’s manufacturing sector stayed robust in April, bolstered by strong demand conditions. 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. The figure was comfortably above the neutral mark of 50.0 and the long-run average of 53.9. The INR trades on a stronger note following the data released.
The Greenback failed to capitalize after the US Federal Reserve (Fed) decided to maintain the status quo on the rate late Wednesday. The Fed Chair Jerome Powell said during the press conference that it’s unlikely that the next policy rate move will be a hike. These comments spark a modest dovish reaction in the markets, which weighs on the Greenback. However, the Fed’s cautious stance over future interest rate cuts and higher-for-longer rate narrative might lift the USD. On the one hand, the weakening of the INR might be limited as the Reserve Bank of India (RBI) continues to stabilize its currency from the volatility.
On Thursday, the usual US weekly Initial Jobless Claims and March’s Goods Trade Balance are due. The spotlight will turn to the US employment data for April on Friday, including Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings.
Daily Digest Market Movers: Indian Rupee remains firm amid RBI’s Intervention
- Between January and March 2023, India’s gold demand was 126.3 tonnes, which increased by 8% to 136.6 tonnes this year, according to a World Gold Council report.
- The Federal Reserve (Fed) kept its benchmark short-term borrowing rate in a targeted range between 5.25% and 5.50%, as widely expected.
- Fed Chair Jerome Powell emphasized that progress on inflation has stalled recently, and it would take longer than previously thought before the Fed had confidence that inflation would move toward its 2% target.
- The US ISM Manufacturing PMI came in worse than expected, falling to 49.2 in April from March’s expansionary reading of 50.3.
- The ADP Employment Change showed an increase of 192,000 jobs in April from the upwardly revised March figure of 208,000, beating the 175,000 expected.
- The JOLTS Job Openings dropped to 8.488 million in March from 8.813 million in the previous reading, marking the lowest level of job openings reported.
Technical analysis: USD/INR maintains a constructive stance in the longer term
The Indian Rupee trades on a stronger note on the day. However, the bullish outlook of USD/INR remains in place as the pair is forming an ascending triangle and remains above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Additionally, the 14-day Relative Strength Index (RSI) holds in bullish territory around 55, supporting the buyers for the time being.
The first upside barrier will emerge near a high of April 15 at 83.50. Further north, the next hurdle is located near the upper boundary of ascending triangles of 83.71, followed by the 84.00 psychological round mark.
On the downside, 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 breach of this level will see a drop to a low of January 15 at 82.78 and finally a low of March 11 at 82.65.
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 | -0.14% | -0.61% | 0.13% | -0.63% | 0.29% | 0.09% | 0.23% | |
| EUR | 0.14% | -0.45% | 0.28% | -0.50% | 0.41% | 0.22% | 0.37% | |
| GBP | 0.59% | 0.45% | 0.72% | -0.04% | 0.88% | 0.67% | 0.82% | |
| CAD | -0.14% | -0.29% | -0.74% | -0.79% | 0.13% | -0.06% | 0.07% | |
| AUD | 0.63% | 0.49% | 0.03% | 0.76% | 0.91% | 0.69% | 0.83% | |
| JPY | -0.27% | -0.41% | -0.87% | -0.15% | -0.91% | -0.19% | -0.05% | |
| NZD | -0.06% | -0.21% | -0.67% | 0.05% | -0.71% | 0.22% | 0.19% | |
| CHF | -0.23% | -0.37% | -0.82% | -0.10% | -0.86% | 0.06% | -0.14% |
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.
