Created
: 2024.04.26
2024.04.26 12:23
Indian Rupee (INR) extends the rally on Friday, bolstered by interbank US Dollar (USD) sales. The softer USD against key rivals overseas and easing geopolitical tensions in the Middle East also supported the local currency. However, the recovery in crude oil prices and foreign capital outflows might weigh on the INR. Additionally, a hawkish repricing of US Federal Reserve (Fed) rate cut expectations amid elevated inflation will continue to boost the USD and cap the pair's downside.
Market players will keep an eye on the final reading of the US March Personal Consumption Expenditures Price Index (PCE), which might offer some hints about the inflation trajectory in the US and point to the Federal Reserve's (Fed) next move. Apart from this, India's general election, which started on 19 April and will run until 1 June, will be closely watched.
The Indian Rupee trades stronger on the day. The positive outlook of USD/INR remains unchanged on the daily chart as the pair is above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) holds in bearish territory around 48.00, suggesting the potential decline cannot be ruled out.
The first downside target of USD/INR will emerge near the confluence of the 100-day EMA and a low of April 10 in the 83.10-83.15 region. A decisive break below this level will see a drop to a low of January 15 at 82.78, followed by a low of March 16 at 82.65. On the upside, the immediate resistance level is seen near a high of April 15 at 83.50. Further north, the next hurdle is located near an all-time high of 83.72, en route to the 84.00 psychological level.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.04% | 0.04% | -0.03% | -0.03% | -0.04% | -0.06% | 0.02% | |
EUR | -0.02% | -0.01% | -0.05% | -0.08% | -0.06% | -0.10% | -0.01% | |
GBP | -0.04% | 0.00% | -0.05% | -0.09% | -0.08% | -0.12% | -0.01% | |
CAD | 0.02% | 0.05% | 0.05% | -0.04% | 0.00% | -0.07% | 0.04% | |
AUD | 0.03% | 0.09% | 0.09% | 0.04% | 0.04% | -0.03% | 0.08% | |
JPY | 0.04% | 0.07% | 0.07% | 0.02% | 0.00% | -0.03% | 0.06% | |
NZD | 0.06% | 0.12% | 0.12% | 0.08% | 0.03% | 0.04% | 0.11% | |
CHF | -0.01% | 0.01% | 0.01% | -0.04% | -0.07% | -0.05% | -0.09% |
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).
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.
Created
: 2024.04.26
Last updated
: 2024.04.26
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