Indian Rupee Weakens in Thursday’s Asian Session
- The increased liquidity flowing into the Indian market and dovish Fed drag the US Dollar down.
- Traders await the US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales on Thursday.
As the Indian Rupee (INR) loses ground amid the recovery of the US Dollar (USD) on Thursday, investors are keeping a close eye on the market dynamics. The recent rate cut by the US Federal Reserve (Fed) may weaken the USD, offering some support to the INR. Additionally, the consistent flow of Foreign Institutional Investor (FII) funds into Indian equities could bolster the local currency.
Despite these factors, a potential rebound in crude oil prices poses a risk to the INR, given India’s significant oil consumption. Looking ahead, market participants are eagerly anticipating key economic indicators, such as the US weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, all scheduled for release on Thursday.
Daily Digest Market Movers: Indian Rupee Edges Lower, But Potential Downside Seems Limited
- The Reserve Bank of India (RBI) is unlikely to ease the benchmark policy rate during 2024, citing uncertainties over food inflation.
- Finance Minister Nirmala Sitharaman expressed optimism about India’s economic growth in the coming years.
- The Federal Open Market Committee (FOMC) initiated a 50 basis points rate cut, the first in over four years.
- Fed Chair Jerome Powell emphasized the central bank’s commitment to supporting economic stability.
- Fed officials revised their economic forecasts, projecting a slight increase in unemployment and the long-run federal funds rate.
Technical Analysis: USD/INR’s Positive Stance Remains Fragile in the Longer Term
Today, the Indian Rupee trades softer, with the USD/INR pair showing signs of vulnerability. The pair’s recent break below the key 100-day Exponential Moving Average (EMA) raises concerns about a potential downside. The 14-day Relative Strength Index (RSI) suggests a bearish bias, indicating room for further depreciation.
Support levels for the pair are identified at 83.64, 83.31, and the psychological mark of 83.00, while resistance levels lie near 83.75 and the 83.90-84.00 region.
Indian Rupee FAQs
The Indian Rupee (INR) is influenced by various factors, including Crude Oil prices, the US Dollar value, foreign investment, RBI interventions, and interest rates. These factors collectively impact the Rupee’s exchange rate stability and value.
The RBI plays a crucial role in maintaining exchange rate stability by intervening in forex markets and adjusting interest rates to control inflation. Higher interest rates typically strengthen the Rupee due to the carry trade dynamics.
Macroeconomic indicators like inflation, interest rates, GDP growth, trade balance, and foreign investment inflows significantly influence the Rupee’s value. Positive growth rates, trade balances, and interest rate differentials attract foreign investment, supporting the Rupee.
Higher inflation levels can negatively impact the Rupee by devaluing the currency and raising import costs. Conversely, lower inflation rates may lead to increased demand for the Rupee due to lower interest rates.