USD/INR recovers some lost ground, all eyes on US CPI data
- Indian Rupee loses its recent gains on the renewed USD demand.
- The Dollar sales from banks, the decline in crude oil prices, and India’s robust growth outlook might limit the INR’s downside.
- Investors will closely monitor the US March CPI inflation report and the FOMC Minutes on Wednesday.
Indian Rupee (INR) loses its recovery momentum on Wednesday amid the modest rebound of US Dollar (USD). The markets turn cautious ahead of the key US inflation data, as it is expected to show a high inflation reading. However, the foreign and state-run banks' USD sales, lower crude oil prices, and robust growth prospects in the Indian economy might provide some support to the INR and cap the upside of the USD/INR pair.
The release of the US March Consumer Price Index (CPI) report and the FOMC Minutes will be the highlights on Wednesday. These events could offer some hints about the inflation trajectory and the path of the Fed’s monetary policy. On the Indian front, the market will be closed on Thursday for Eid al-Fitr. The attention will shift to the Indian CPI inflation report for March and Industrial Production for February, due on Friday.
Daily Digest Market Movers: Indian Rupee turns red amid the cautious mood
- India’s eight states will have an economy of over $1 trillion as the country moves towards becoming a developed nation by FY47, according to the India Ratings and Research (Ind-Ra) report.
- RBI Governor Shaktikanta Das said that inflation is moving closer to targets, projecting retail inflation for the current year at 4.5%. Nonetheless, uncertainties in food prices continue to pose challenges.
- India's robust growth prospects give the central bank the space to remain focused on inflation, RBI Governor Shaktikanta Das said.
- Chicago Fed President Austan Goolsbee said the recent jobs report was “quite strong”, but the central bank must weigh how much longer it can maintain its current interest rate stance without damaging the economy.
- Minneapolis Fed President Neel Kashkari said that the labor market is no longer ‘red hot’ but remains tight. He said his base case is that inflation continues to ease.
- The chance of a June rate cut dropped to nearly 57%, while the odds of a July cut have fallen below 75%, according to the CME’s FedWatch tool.
Technical analysis: USD/INR keeps the positive outlook intact in the longer term
The Indian Rupee trades softer on the day. USD/INR maintains its bullish stance unchanged in the long term since the pair has risen above a nearly four-month-old descending trend channel since March 22.
In the near term, USD/INR is above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The 14-day Relative Strength Index (RSI) remains above the 50-midline, indicating the support zones are more likely to hold than to break.
The key support level will emerge near the confluence of the psychological round mark and the 100-day EMA at the 83.00–83.50 region. The additional downside filter to watch is a low of March 14 at 82.80, followed by a low of March 11 at 82.65. On the upside, the first upside target is seen near a low of April 2 at 83.30. Further north, the next barrier is located near a high of April 5 at 83.45, en route to an all-time high of 83.70.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.03% | -0.07% | 0.11% | -0.01% | -0.03% | 0.08% | |
| EUR | -0.06% | -0.04% | -0.10% | 0.06% | -0.06% | -0.09% | 0.03% | |
| GBP | -0.03% | 0.02% | -0.08% | 0.08% | -0.04% | -0.06% | 0.06% | |
| CAD | 0.05% | 0.10% | 0.07% | 0.14% | 0.04% | 0.04% | 0.13% | |
| AUD | -0.12% | -0.06% | -0.06% | -0.16% | -0.11% | -0.14% | -0.01% | |
| JPY | 0.01% | 0.07% | 0.03% | -0.05% | 0.11% | 0.02% | 0.09% | |
| NZD | 0.03% | 0.09% | 0.06% | -0.02% | 0.14% | 0.02% | 0.11% | |
| CHF | -0.09% | -0.03% | -0.05% | -0.13% | 0.03% | -0.09% | -0.12% |
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 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.