USD/INR loses momentum, focus on the Indian Trade Balance, US data


  • Indian Rupee gains traction, backed by lower US Treasury bond yields, weaker USD.
  • India’s Wholesale Price Index (WPI) inflation remained in the deflationary zone in October.
  • Indian Trade Balance and US Producer Price Index (PPI), Retail Sales will be due on Wednesday.

Indian Rupee (INR) trades strongly on Wednesday on the decline of US Treasury bond yields. On Tuesday, India’s inflation, as measured by the Wholesale Price Index (WPI), remained in the deflationary zone for the seventh month in a row in October, coming in at -0.52% versus -0.26% prior. That being said, the overall price development in manufactured products contributed to lower wholesale inflation in October. Nonetheless, India remains vulnerable to higher crude prices as India is the world’s third-biggest oil consumer.

Market participants will keep an eye on the Indian Trade Balance for October. In the meantime, the Reserve Bank of India (RBI) is likely to intervene to prevent the volatility in the national currency, which might cap the INR’s depreciation in the near term. Also, the US Producer Price Index (PPI) and Retail Sales will be released later on Wednesday.

Daily Digest Market Movers: Indian Rupee trades firmly, US dollar declines on weaker US inflation data

  • India’s headline retail price inflation dropped to a four-month low of 4.9% in October from the previous reading of 5%.
  • India’s Wholesale Price Index (WPI) inflation came in at -0.52% versus -0.26% prior, below the estimations of -0.20%.
  • India’s Consumer Price Index (CPI) climbed 4.87% YoY in October from the previous reading of 5.02%, above the market consensus of 4.80%.
  • The Reserve Bank of India (RBI) has kept interest rates steady for four consecutive meetings and maintains a relatively hawkish policy stance to alleviate price pressures.
  • RBI Governor Shaktikanta Das said India remains sensitive to food price shocks, and monetary policy continues to push inflation towards the 4% target.
  • RBI forecasts India’s GDP will expand at a 6.3% annual rate in the current fiscal year.
  • US Consumer Price Index (CPI) grew 3.2% YoY in October from the previous reading of 3.7%, lower than the expectation of 3.3%.
  • The US Core CPI, which excludes volatile food and energy prices, rose by 0.2% MoM and 4.0% YoY.
  • Fed fund futures are now pricing no further US rate hikes in this cycle, according to the CME FedWatch Tool.

Technical Analysis: The Indian Rupee strengthens but the upside potential seems limited

The Indian Rupee trades firm on the day. The USD/INR pair has hovered around the lower limit of the trading range of 83.00–83.35 since late September. However, the USD/INR maintains a bullish vibe as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.

The initial support level for the pair is located near a low of September 12 at 82.82. Any follow-through selling will see losses extend to a low of September 22 at 82.75, followed by a low of August 4 at 82.65.

On the upside, the immediate upside barrier will emerge near the upper boundary of the trading range of 83.35. A break above 83.35 will see a rally to a year-to-date (YTD) high of 83.47. The additional upside filter to watch is a psychological round figure at 84.00.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Canadian Dollar.

USD   0.05% 0.05% -0.07% 0.00% 0.15% -0.29% -0.02%
EUR -0.07%   -0.02% -0.13% -0.07% 0.09% -0.36% -0.09%
GBP -0.05% 0.02%   -0.12% -0.06% 0.10% -0.33% -0.08%
CAD 0.07% 0.16% 0.14%   0.09% 0.22% -0.22% 0.05%
AUD 0.01% 0.07% 0.06% -0.06%   0.15% -0.29% -0.01%
JPY -0.15% -0.08% -0.11% -0.23% -0.17%   -0.42% -0.16%
NZD 0.28% 0.35% 0.33% 0.22% 0.28% 0.43%   0.27%
CHF 0.02% 0.07% 0.06% -0.05% 0.01% 0.17% -0.27%  

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.

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