- Indian Rupee trades weaker on the rebound in oil prices, USD demand.
- Global uncertainties will have a limited impact on the Indian economy.
- Market players will monitor the FOMC Meeting Minutes on Tuesday for fresh impetus.
Indian Rupee (INR) sticks to its modest intraday losses on Monday due to the recovery in oil prices and US demand from the local companies. Last week, S&P Global Ratings published a report indicating that slower external demand and sluggish global growth will impact economic activity and may contribute to further inflation. Nonetheless, the Indian economy will be marginally less affected by global uncertainties due to the country being domestically oriented.
Investors will focus on the Federal Open Market Committee (FOMC) Meeting Minutes on Tuesday. The report could provide some hints about future policy rate direction and inflation improvement. Market participants raised bets that the Federal Reserve (Fed) is done with the hiking cycle and priced in rate cuts of 100 basis points (bps) in the first half of 2024.
Daily Digest Market Movers: Indian Rupee faces limited risk from global factors and uncertainties
- The momentum of change in India’s GDP is sequentially expected to be higher in October-December on the back of “ebullient” festival demand, according to a report in the Reserve Bank of India’s (RBI) monthly bulletin.
- According to the RBI, the Indian economy will see a GDP growth rate of 6.5% in 2023-24.
- The central bank also stated India’s growth remains dependent on domestic demand, which provides a cushion against external shocks.
- RBI is expected to maintain the policy rate at its next monetary policy meeting, which is scheduled for December 6-8.
- India’s headline retail price inflation for October fell to 4.9% from 5% the previous month, the lowest reading in four months.
- India’s Wholesale Price Index (WPI) inflation arrived at -0.52% from -0.26%,previously, worse than the market consensus of -0.20%.
- The Consumer Price Index (CPI) in India grew by 4.87% year on year in October, compared to 5.02% the previous month, above the market estimate of 4.80%.
- US Housing Starts climbed by 1.9% MoM to 1.372M, better than the expectation of 1.350M. Building Permits rose by 1.1% to 1.487M, above the estimation of 1.450M.
- Federal Reserve (Fed) officials remarked on the prospects for monetary policy last week and were consistent in their tone.
- Boston Fed President Susan Collins said the central bank might bring down inflation without harming the labor market by being “patient” with future interest rate hikes.
- Fed President Austan Goolsbee stated that inflation is on pace to meet the Fed’s target as long as house price pressures decrease.
Technical Analysis: The Indian Rupee keeps the bearish outlook unchanged
The Indian Rupee trades softer on the day. The USD/INR pair has traded within a wider range of 82.80–83.35 since September. From a technical perspective, the USD/INR maintains a bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. This notion is backed by the 14-day Relative Strength Index (RSI) holding above the 50.0 midline.
The first USD/INR upside barrier is near the upper boundary of the trading range of 83.35. A decisive break above 83.35 could open the door to challenge the year-to-date (YTD) high of 83.47. Further north, the additional upside filter to watch is a psychological round figure at 84.00.
On the other hand, the confluence of the lower limit of the trading range and a low of September 12 at 82.80 act as an initial support level for the pair. If the sellers drag prices below 82.80, the next contention will emerge at a low of August 11 at 82.60, followed by a low of August 24 at 82.37.
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 Canadian Dollar.
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 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.