- Indian Rupee edges higher on Monday on the weaker USD.
- The optimistic Indian economic outlook and the continuous foreign inflows boost the Indian Rupee.
- The US Fed interest rate decision on Wednesday will be in the spotlight.
Indian Rupee (INR) recovers its lost ground on Monday amid the modest decline of US Dollar (USD). The recovery of the INR is bolstered by the positive economic outlook in the Indian economy and the continuous foreign inflows into government bonds. Foreign portfolio investors increased their holdings of Indian government bonds by roughly 50% since the index inclusion news less than six months ago. Nonetheless, the risk-averse environment, higher crude oil prices, and higher US Treasury bond yields might cap the upside of the INR and create a tailwind for the USD/INR pair.
Investors will closely monitor the Fed interest rate decision on Wednesday, which is widely expected to keep rates steady at its March meeting. Market players will also take cues from Fed Chairman Jerome Powell’s remarks during the press conference, as it might offer some hints about the future trajectory of US interest rates. On Thursday, India’s S&P Global Manufacturing and Services PMI will be due.
Daily Digest Market Movers: Indian Rupee remains strong amid multiple challenges
- The Indian merchandise trade deficit widened to $18.7 billion in February from $16.57 billion in January as gold imports surged significantly amid the Red Sea geopolitical tensions.
- Goods imports rose to $60.11 billion in February versus $54.41 billion in January, while exports arrived at $41.40 billion in February from $36.92 billion in January, according to the commerce ministry.
- The University of Michigan Consumer Sentiment Index eased to 76.5 in March compared to expectations and the previous reading of 76.9.
- The preliminary UoM one-year and five-year inflation expectations for March were unchanged at 3.0% and 2.9%, respectively.
- US Industrial Production improved to 0.1% MoM in February from a downwardly revised -0.5% MoM in January.
Technical Analysis: Indian Rupee remains capped within a longer-term band between 82.60 and 83.15
Indian Rupee trades stronger on the day. USD/INR continues its rangebound movement within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023.
Technically, USD/INR maintains a bearish outlook in the near term as the pair holds below the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) lies below the 50.0 midline, emphasizing the downward momentum and hinting that sellers have the upper hand.
The potential support level for USD/INR is seen near the lower limit of the descending trend channel at 82.60. A breach of this level will expose 82.45 (low of August 23), en route to 82.25 (low of June 1). On the upside, the immediate resistance level is located near the 100-day EMA and a psychological mark at 83.00. A break above the mentioned level might resume its rally to the upper boundary of the descending trend channel near 83.15. The next hurdle to watch is 83.35 (high of January 2), followed by the 84.00 round figure.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | 0.01% | -0.08% | -0.11% | 0.11% | -0.14% | -0.02% | |
| EUR | 0.03% | 0.05% | -0.03% | -0.10% | 0.15% | -0.10% | 0.01% | |
| GBP | -0.01% | -0.05% | -0.08% | -0.12% | 0.10% | -0.15% | -0.04% | |
| CAD | 0.08% | 0.04% | 0.08% | -0.06% | 0.18% | -0.07% | 0.04% | |
| AUD | 0.11% | 0.10% | 0.14% | 0.06% | 0.25% | 0.00% | 0.10% | |
| JPY | -0.11% | -0.14% | -0.04% | -0.18% | -0.25% | -0.25% | -0.14% | |
| NZD | 0.14% | 0.10% | 0.15% | 0.07% | 0.00% | 0.25% | 0.11% | |
| CHF | 0.03% | -0.01% | 0.04% | -0.04% | -0.10% | 0.14% | -0.11% |
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).
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.