[ad_1]
- Indian Rupee edges higher amid the decline in oil prices, US Treasury bond yields.
- The Reserve Bank of India (RBI) is likely to maintain an interest rate pause at 6.50% at its December meeting.
- Market players await the Indian and US Services PMI, due later on Tuesday.
Indian Rupee (INR) trades stronger on Tuesday on the decline in oil prices and lower US Treasury bond yields. Prime Minister Narendra Modi’s Bharatiya Janata Party won the elections in three of the five Indian states that had recently gone to the polls. That being said, the election results will likely be positive for equities inflows, alleviating some pressure on INR devaluation in the near term.
The Reserve Bank of India (RBI) is expected to announce a continuation of its pause on the interest rate at 6.50% and maintain a hawkish stance on Friday. Analysts predict a fifth consecutive pause by the Monetary Policy Committee (MPC) due to concerns about potential food price shocks affecting inflation expectations.
Ahead of the RBI interest rate decision, investors will keep an eye on the S&P Global India Services PMI for November, due on Tuesday. The figure is expected to ease from 58.4 to 58.0. Additionally, the US ISM Services PMI will be released later in the day, which is expected to rise from 51.8 to 52.0.
Daily Digest Market Movers: Indian Rupee gains traction amid challenges and uncertainties
- RBI is likely to be selling the US dollar near the 83.38–83.39 Rupee levels, per Reuters.
- RBI Governor Shaktikanata Das said that headline inflation has moderated, and the Indian economy remains vulnerable to overlapping food price shocks coming from global factors and adverse weather events.
- India’s second-quarter Gross Domestic Product grew 7.6%, marking her the world’s fastest-growing major economy, driven by manufacturing and the government’s spending.
- US Factory Orders fell 3.6% MoM in October from the previous reading of 2.3%.
- US ISM Manufacturing PMI remained unchanged at 46.7 in November, weaker than expected.
- According to the CME FedWatch Tool, Fed futures are pricing in a 60% odds of a rate cut at the Fed’s March meeting, up from 21% over a week ago.
Technical Analysis: Indian Rupee’s positive outlook remains unchanged
Indian Rupee drifts higher on the day. The USD/INR pair has traded within a familiar trading band of 82.80–83.40 since September. From the technical perspective, the bullish tone of USD/INR will prevail as long as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. This upward momentum is supported by the 14-day Relative Strength Index (RSI) that bounced off the 50.0 midline, indicating the further upside looks favorable.
A decisive break above the upper boundary of the trading range of 83.40 will pave the way to the year-to-date (YTD) high of 83.47, en route to a psychological round figure of 84.00. On the flip side, the critical support level is seen at the 83.00 psychological mark. Further south, the next contention to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.05% | -0.03% | 0.13% | 0.58% | -0.16% | 0.26% | -0.01% | |
| EUR | 0.03% | 0.01% | 0.18% | 0.61% | -0.12% | 0.30% | 0.04% | |
| GBP | 0.03% | -0.01% | 0.18% | 0.62% | -0.10% | 0.31% | 0.01% | |
| CAD | -0.14% | -0.19% | -0.18% | 0.42% | -0.28% | 0.13% | -0.15% | |
| AUD | -0.58% | -0.64% | -0.63% | -0.45% | -0.72% | -0.32% | -0.62% | |
| JPY | 0.14% | 0.06% | 0.07% | 0.25% | 0.71% | 0.38% | 0.11% | |
| NZD | -0.27% | -0.30% | -0.29% | -0.13% | 0.32% | -0.41% | -0.29% | |
| CHF | 0.01% | -0.04% | -0.01% | 0.16% | 0.59% | -0.15% | 0.28% |
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.
[ad_2]
Source link