Indian Rupee Softens in Thursday’s Asian Session
- Risk-off Sentiment and Higher Crude Oil Prices Impact the INR
- Investors Await US September ISM Services PMI and Employment Data
In today’s trading, the Indian Rupee (INR) has experienced a slight decline, primarily due to increased demand for the US Dollar (USD). The prevailing risk-off sentiment, fueled by escalating geopolitical tensions in the Middle East, has led to a flow of safe-haven investments towards the Greenback. Furthermore, rising crude oil prices have added selling pressure on the INR, given India’s status as the third-largest oil consumer globally, following the United States (US) and China.
Looking ahead, investors will closely monitor key economic indicators, including the US September ISM Services Purchasing Managers Index (PMI), weekly Initial Jobless Claims, and final S&P Global Services PMI, scheduled for release later today. Attention will then turn to the US September employment data on Friday, which includes Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings. A weaker-than-expected jobs report could prompt the central bank to consider deeper rate cuts, potentially impacting the USD.
Daily Digest Market Movers: Indian Rupee Faces Multiple Headwinds
- The HSBC final India Manufacturing PMI for September dropped to an eight-month low of 56.5, below market expectations and the previous reading.
- Pranjul Bhandari, chief India economist at HSBC, noted a softening momentum in India’s manufacturing sector from the strong growth seen in previous months.
- The Reserve Bank of India’s (RBI) real effective exchange rate (REER) index indicated the INR was 5.5% above its fair value in August, down from the previous month.
- The US ADP Employment Change data for September surpassed forecasts with 143,000 new jobs added, indicating a positive trend in the labor market.
- Richmond Fed President Thomas Barkin highlighted challenges in achieving the Fed’s inflation target and potential limitations on interest rate cuts.
Technical Analysis: USD/INR Outlook Remains Positive
Despite the slight decline in the Indian Rupee, the USD/INR pair maintains a constructive bias. On the daily timeframe, the price remains above the key 100-day Exponential Moving Average (EMA), signaling a positive trend. The 14-day Relative Strength Index (RSI) crossing above the midline further supports the likelihood of the uptrend continuing.
The critical resistance level for USD/INR is at 84.00, with potential targets at 84.15 and 84.50 on the upside. On the downside, initial support is at 83.80, followed by the 100-day EMA at 83.64 and 83.00.
Indian Rupee FAQs
- Factors Influencing the Indian Rupee
The INR is sensitive to external factors such as Crude Oil prices, USD value, foreign investment, RBI interventions, and interest rates.
The RBI intervenes in forex markets to maintain stability and adjusts interest rates to influence inflation and strengthen the Rupee.
Macroeconomic factors like inflation, GDP growth, trade balance, and foreign investment impact the Rupee’s value.
Higher inflation can devalue the Rupee, while higher interest rates and positive economic conditions boost its strength.
Analysis:
The Indian Rupee’s performance is influenced by various global and domestic factors, making it a dynamic currency to track for investors and traders. The recent softening of the INR against the USD can be attributed to the risk-off sentiment, geopolitical tensions, and higher oil prices. Additionally, key economic indicators like the US ISM Services PMI and employment data play a crucial role in shaping market expectations and currency movements.
From a technical perspective, the USD/INR pair maintains a positive bias, with key resistance and support levels identified for potential trading opportunities. Understanding the factors affecting the INR, including RBI interventions, interest rates, and macroeconomic conditions, is essential for making informed investment decisions.
Overall, staying informed about market developments, economic data releases, and technical analysis can help investors navigate the complexities of the currency markets and capitalize on trading opportunities.