The Indian Rupee (INR) faced a setback on Monday as the US Dollar (USD) gained strength, causing the INR to drift lower. Despite being the second-worst-performing Asian currency in August, the INR may find support from foreign equity inflows and decreasing crude oil prices. Investors are keeping an eye on the upcoming Indian HSBC Manufacturing PMI for August to gauge the economic performance.
Market Analysis: Factors Impacting Indian Rupee
- Indian Rupee depreciated by 0.2% in August, trading at 83.87 per dollar, close to its lifetime low of 83.97. This decline was influenced by various factors such as a slowdown in FPI inflows and increased dollar demand by importers.
- India’s economic growth dipped to a 15-month low of 6.7% in the April-June quarter, following a 7.8% expansion in the previous quarter.
- US PCE Price Index rose 0.2% MoM in July, with core PCE excluding food and energy prices increasing by 0.2% for the month and 2.6% from a year ago.
- Traders are anticipating a 25 bps rate cut by the Fed in September, with a 70% probability, based on the CME FedWatch tool.
Technical Analysis: USD/INR Outlook
USD/INR remains below the 84.00 barrier but is supported above the 100-day EMA on the daily chart. The RSI indicates bullish momentum, favoring the USD. The key levels to watch are 84.00 as resistance and 83.77 as support.
Understanding Indian Rupee FAQs
- The INR is influenced by external factors like crude oil prices, USD value, foreign investment, RBI interventions, and interest rates.
- RBI intervenes in forex markets to maintain stability and adjust interest rates to control inflation, affecting the Rupee’s strength.
- Macroeconomic factors such as inflation, interest rates, GDP growth, trade balance, and foreign investment inflows impact the Rupee’s value.
- Higher inflation can devalue the currency, while lower inflation may lead to increased demand from international investors.
Financial Implications for Investors
Investors should monitor the USD/INR exchange rate, economic data releases, and global market trends to make informed decisions. Understanding the factors influencing the Indian Rupee can help in managing currency risks and optimizing investment strategies. Stay updated on key events and market movements to navigate the financial landscape effectively.