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USD/INR gains momentum, all eyes on Fed decision

November 1, 2023| Forex Market


  • Indian Rupee struggles to gain on the stronger USD.
  • The Reserve Bank of India (RBI) Governor highlighted the optimistic view for the Indian economy.
  • Investors will closely monitor the Federal Open Market Committee (FOMC) policy meeting on Wednesday.

Indian Rupee ticks lower on Wednesday on the renewed US Dollar (USD) demand. That being said, the higher-for-longer US interest rate narrative has lifted US Treasury bond yields to multi-year highs, which acts as a tailwind for the pair. Elevated geopolitical risks in the Middle East might also lead to higher oil prices and impact Indian importers.

Nonetheless, the Reserve Bank of India (RBI) Governor Shaktikanta Das said Tuesday that India’s growth momentum remains robust and the Gross Domestic Product (GDP) in the second quarter of Fiscal Year 2024 is expected to surprise on the upside. Das further stated that geopolitical risks are the biggest challenge to growth. However, he is confident that India is in a better position compared to other countries to deal with potentially risky situations.

Market participants will closely monitor the Federal Open Market Committee (FOMC) policy meeting, with no change in rates expected. However, a hawkish stance during the press conference might trigger volatility in the Indian market. Later this week, the spotlight will shift to US Nonfarm Payrolls on Friday.

Daily Digest Market Movers: Indian Rupee maintains a bearish vibe amid the uncertainty

  • Reserve Bank of India (RBI) Governor Shaktikanta Das said GDP growth for the second quarter of FY24 will exceed expectations.
  • RBI Governor Das said geopolitical risks are the biggest challenge, but India is better placed compared to other countries to deal with any potentially risky situation.
  • Overseas investors sold $2.74 billion in Indian equities in October, marking the largest monthly sell-off since January.
  • According to the RBI, India’s foreign currency reserves fell by $2.36 billion to $583.53 billion in the week ending October 20.
  • RBI will maintain watch over inflation to ensure that it remains within the 4% target.
  • The International Monetary Fund (IMF) raised its projected growth rate for India to 6.3% in October.
  • The US S&P/Case-Shiller Home Price Indices for August improved to 2.2% YoY versus 0.2% prior, better than the expectation of 1.6%.
  • The US Core Personal Consumption Expenditure Index (PCE) for September arrived at 3.7% YoY from the previous reading of 3.8%, and the headline PCE arrived at 3.4% YoY versus the estimation of 3.4%.

Technical Analysis: Indian Rupee keeps a bearish stance in a familiar range

The Indian Rupee trades with mild losses on the day. The USD/INR pair trades within a familiar range of 83.00–83.35. However, the technical outlook suggests that the bullish bias stays intact as the pair holds above the 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.

The key resistance level will emerge at the upper boundary of the trading range of 83.35. A decisive break above the latter will see a rally to year-to-date (YTD) highs of 83.45. The additional upside filter to watch is a psychological round figure at 84.00. On the other hand, the confluence of a low of October 20 and a round mark at 83.00 acts as a critical contention level. Any follow-through selling below 83.00 will pave the way to a low of September 12 at 82.82, followed by a low of August 4 at 82.65.

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the Pound Sterling.

USD   0.26% 0.22% 1.00% 0.46% 0.98% 0.67% 1.85%
EUR -0.26%   -0.04% 0.74% 0.21% 0.72% 0.41% 1.58%
GBP -0.22% 0.04%   0.79% 0.24% 0.75% 0.45% 1.63%
CAD -1.01% -0.74% -0.79%   -0.53% -0.02% -0.33% 0.85%
AUD -0.46% -0.21% -0.24% 0.54%   0.51% 0.20% 1.38%
JPY -0.99% -0.71% -0.76% 0.01% -0.53%   -0.30% 0.87%
NZD -0.67% -0.41% -0.45% 0.33% -0.20% 0.30%   1.18%
CHF -1.89% -1.62% -1.66% -0.88% -1.42% -0.92% -1.21%  

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).

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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