Indian Rupee Softens Amid USD Demand and Position Unwinding
- Indian Rupee loses momentum: The INR weakens on Friday due to increased demand for the US Dollar from importers for month-end payments and the likely unwinding of long positions.
- Favorable factors: Despite the pressure on the INR, falling crude oil prices and a strong performance in Indian equities could help limit the currency’s losses.
Key Economic Indicators to Watch
- US PCE Price Index: Investors are closely monitoring the release of the US August Personal Consumption Expenditures (PCE) Price Index, a key inflation indicator for the Fed.
- Expected data: The forecast suggests a 2.3% year-on-year increase in the headline PCE and a 2.7% rise in the core PCE for August.
- Michigan Consumer Sentiment Index: The release of this index for September will also provide valuable insights into consumer sentiment.
Market Insights and Analysis
- USD/INR dynamics: The dollar-rupee pair has seen fluctuations throughout the week, with importers driving demand for the USD towards month-end payments.
- Equity market performance: India’s Sensex and Nifty hit record highs, reflecting positive sentiment in the stock market.
- US economic data: Durable Goods Orders remained flat in August, while the GDP growth rate for Q2 was in line with previous estimates.
- Fed’s stance: Fed Governor Lisa Cook supported the recent interest rate cut as a response to growing risks to employment.
Technical Analysis and Forecast
- USD/INR outlook: The pair maintains a bearish view on the daily chart, with key resistance levels identified.
- Support and resistance levels: The low of September 23 acts as initial support, while a break above the 100-day EMA could signal further upside potential.
Indian Rupee FAQs
- External factors: The INR is influenced by factors such as crude oil prices, USD value, foreign investment, RBI interventions, and interest rates.
- RBI interventions: The RBI intervenes in forex markets to maintain exchange rate stability and adjust interest rates to control inflation.
- Macroeconomic factors: Inflation, interest rates, GDP growth, trade balance, and foreign investment inflows all impact the value of the Rupee.
- Inflation impact: Higher inflation can be negative for the currency, while lower inflation may have a positive effect on the Rupee.