Tag: USDINR

  • USD/INR loses traction on likely RBI intervention

    USD/INR loses traction on likely RBI intervention


    • The Indian Rupee gains traction in Monday’s early European session. 
    • Foreign exchange intervention from the RBI might help limit the INR’s losses. 
    • India’s HSBC Manufacturing PMI and US ISM Manufacturing PMI will take center stage later on Monday. 

    The Indian Rupee (INR) gathers strength on Monday. The potential intervention from the Reserve Bank of India (RBI) could provide some support to the local currency. On the other hand, the latest tariff rounds from US President Donald Trump on Canada, Mexico, and potentially China could boost the US Dollar (USD) and exert some selling pressure on the INR. Additionally, a recovery in crude oil prices could drag the Indian Rupee lower as India is the world’s third-largest oil consumer. 

    Looking ahead, traders will keep an eye on India’s HSBC Manufacturing Purchasing Managers Index (PMI) for February, which will be published later on Monday. On the US docket, the ISM Manufacturing PMI will be released. 

    Indian Rupee rebounds despite Trump’s tariff threats

    • “Markets continue to live with the uncertainty and whiplash of the multitude of tariff proposals in the pipeline,” said MUFG Bank. 
    • India’s real Gross Domestic Product (GDP) grew 6.2% YoY in the fourth quarter (Q4) of 2024, compared to a 5.6% growth (revised from 5.4%) recorded in the previous quarter, according to data released by the National Statistical Office (NSO) on Friday. This figure came in weaker than the 6.3% expected. 
    • The US Personal Consumption Expenditures (PCE) Price Index increased 0.3% in January, in line with expectations, the US Bureau of Economic Analysis showed on Friday. 
    • The US PCE Price Index climbed 2.5% YoY in January, compared to 2.6% in December. The core PCE Price Index, which excludes volatile food and energy prices, climbed 2.6% YoY in January, down from 2.9% in December. Both figures came in line with the market consensus. 

    USD/INR sticks to positive bias in the longer term

    The Indian Rupee trades in negative territory. The bullish outlook of the USD/INR pair prevails, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Further upside looks favorable as the 14-day Relative Strength Index (RSI) is located above the midline near 63.75. 

    The first upside barrier for USD/INR emerges at 87.53, the high of February 28. A bullish candlestick breaking above this level could lift the pair to an all-time high near 88.00 then 88.50. 

    On the flip side, the initial support level for the pair is seen in the 87.05-87.00 zone, representing the low of February 27 and the round mark. A breach of the mentioned level could drag USD/INR to the next bearish targets at 86.48, the low of February 21, followed by 86.14, the low of January 27. 

     



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  • USD/INR jumps as RBI rate cut bets drag Indian Rupee lower to record low

    USD/INR jumps as RBI rate cut bets drag Indian Rupee lower to record low


    • The Indian Rupee extends its decline in Thursday’s early European session. 
    • Rising bets of RBI rate cuts and risk aversion continue to undermine the INR. 
    • The RBI interest rate decision and the US January employment report will be in the spotlight on Friday. 

    The Indian Rupee (INR) extends its downside on Thursday. The local currency remains under selling pressure amid the expectation that the Reserve Bank of India (RBI) might cut the interest rates on Friday. Additionally, global trade war concerns fuelled risk aversion among investors, weighing on the INR. 

    Nonetheless, the foreign exchange intervention by the RBI and a decline in crude oil prices might help limit the Indian Rupee’s losses. Later on Thursday, the US weekly Initial Jobless Claims, Unit Labor Costs and Nonfarm Productivity will be released. The attention will shift to the RBI interest rate decision and the US January employment data on Friday. 

    Indian Rupee falls as India’s new RBI Governor is set to begin rate cuts

    • The RBI is likely conducting buy/sell USD-INR swaps, pushing forward premiums lower, according to traders. 
    • USD/INR 1-year forward implied yield retreats from the day’s high, last at 2.19%. 
    • Most of the economists surveyed by Bloomberg anticipate the Indian central bank to lower the benchmark repurchase rate by at least 25 basis points (bps) to 6.25% on Friday.
    • HSBC India Composite PMI came in at 57.7 in January. This figure came in weaker than the previous reading and the estimation of 57.9. 
    • HSBC India Services PMI eased to a two-year low of 56.5 in January versus 56.8 prior, lower than expected. 
    • “India’s services sector lost growth momentum in January, although the PMI remained well above the 50-break-even level. The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023, respectively,” said Pranjul Bhandari, Chief India Economist at HSBC.
    • The US Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December, according to the Institute for Supply Management (ISM) on Wednesday. This reading came in below the market consensus of 54.3. 
    • Fed Vice Chair Philip Jefferson said on Thursday that he is happy to keep the Fed Funds on hold at the current level, adding that he will wait to see the net effect of Trump policies.

    USD/INR maintains its positive trend

    The Indian Rupee trades in negative territory on the day. The bullish view of the USD/INR pair prevails, characterized by the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation as the 14-day Relative Strength Index (RSI) moves beyond the 70.00 mark. 

    The first upside barrier for USD/INR emerges at 87.49, an all-time high. Bullish candlesticks and buying pressure above this level might attract the pair to the 88.00 psychological level. 

    On the other hand, the 87.05-87.00 area acts as an initial support level for the pair, representing the low of February 5 and the round mark. More bearish candles or consistent trading below the mentioned level, the bears could take control and drag USD/INR down to 86.51, the low of February 3. 

    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.

     



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  • USD/INR holds steady as Trump threatens China with tariffs

    USD/INR holds steady as Trump threatens China with tariffs


    • The Indian Rupee trades flat in Wednesday’s Asian session.
    • Renewed USD demand and Trump’s tariff announcements might weigh on the INR. 
    • The routine RBI intervention and lower crude oil prices might cap the downside for local currency. 

    The Indian Rupee (INR) flat lines on Wednesday. The persistent US Dollar (USD) buying from foreign portfolio investors and local oil companies could weigh on the lNR. Additionally, US President Donald Trump’s plan to impose tariffs on China might exert some selling pressure on Asian peers, including the Indian Rupee. 

    Nonetheless, the downside for the INR might be limited as the Reserve Bank of India (RBI) could intervene in the foreign exchange market via USD sales to prevent the local currency from significant depreciation. A decline in crude oil prices might also help limit the INR’s losses as India is the world’s third-largest oil consumer. Investors will closely monitor the preliminary reading of HSBC India’s Purchasing Managers Index (PMI) and US S&P PMI data for January, which will be published later on Friday. 

    Indian Rupee looks fragile amid multiple headwinds

    • India’s GDP is estimated to grow at 6.5-6.8% in the current fiscal year, according to Deloitte India on Tuesday.
    • Moody’s lowered India’s economic growth forecast to 7.0% for the fiscal year ending March 2025, down from 8.2% recorded in the previous fiscal year.
    • Overseas investors have sold a net total of about $6.5 billion worth of local equities and bonds in January, the largest monthly outflow since October 2023.
    • Trump stated on Tuesday that his administration is discussing imposing a 10% tariff on goods imported from China on February 1 because fentanyl is being sent from China to Mexico and Canada, per Reuters. 

    USD/INR price action remains constructive in the longer term 

    The Indian Rupee trades on a flat note on the day. The path of least resistance is to the upside as the USD/INR pair has formed higher highs and higher lows while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) is located above the midline near 67.00, indicating bullish momentum in the near term. 

    The all-time high of 86.69 appears to be a tough nut to crack for bulls. A sustained break above the mentioned level could open the door for a rally toward the 87.00 psychological level. 

    On the flip side, a move back below 86.18, the low of January 20, could clear the way for a dip to the next support level at 85.85, the low of January 10. The next downside target to watch is 85.65, the low of January 7. 

    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.

     



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