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  • Indian Rupee attracts some buyers despite the stronger GDP figure.
  • The higher Treasury bond yields, Middle East geopolitical conflicts might cap the INR’s upside.
  • Investors will monitor the US Core Personal Consumption Expenditures Price Index (PCE) data, which is expected to ease in September.

Indian Rupee (INR) holds positive ground on Friday. The USD/INR pair loses momentum on the lower US Treasury bond yields despite the upbeat US Gross Domestic Product (GDP) figures. Nonetheless, the Indian Rupee remains sensitive to market sentiment and the Middle East escalating tension headline could limit the INR’s upside in the near term.

Market participants will keep an eye on the US Core Personal Consumption Expenditures Price Index (PCE), due later on Friday. Next week, the attention will shift to the Federal Reserve’s Federal Open Market Committee (FOMC) meeting. The markets anticipate FOMC to keep the interest rate unchanged at its meeting scheduled for November 2.Furthermore, the Reserve Bank of India (RBI) is set to meet with top bank officials next week to discuss the current liquidity condition in the banking system.

Daily Digest Market Movers: Indian Rupee gains ground amid the uncertainty

  • Equity-related outflows have also kept the Indian Rupee under pressure as foreign investors sold $1.67 billion in Indian equities in October.
  • US Q3 GDP expanded at an annualized rate of 4.9%, above the market consensus of 4.2%.
  • US Durable Goods Orders rose 4.7% MoM in September versus a 0.1% drop in August, beating market expectations of 1.5%.
  • US Initial Jobless Claims for the week ending October 21 climbed to 210K from the prior week’s data of 200K, exceeding estimates.
  • US Continuing claims rose by 63,000, the highest reading since May.
  • The Reserve Bank of India (RBI) is likely to meet with top bank officials next week to discuss the current liquidity condition in the banking system.
  • The RBI’s monetary policy committee said the central bank will continue monitoring on maintaining inflation at the 4% target.
  • RBI estimated India’s Gross Domestic Product (GDP) will grow at 6.5% in the current fiscal year.
  • The International Monetary Fund (IMF) raised its forecast growth rate for India to 6.3% in October.
  • RBI’s October bulletin suggested growth in India is expected to gain momentum for the remainder of 2023.
  • India’s Wholesale Price Index (WPI), a measure of inflation, dropped -0.26% YoY in September versus 0.52% prior, below the market expectation of 0.50%.

Technical Analysis: The Indian Rupee trades strongly above the critical support level

The Indian Rupee trades firmly on the day. The USD/INR pair trades within a range of 83.00-83.35. Meanwhile, the pair holds above the 100- and 200-day Exponential Moving Averages (EMA) on the daily chart, suggesting the upward bias remains intact for the pair.

That being said, any follow-through buying above 83.35 will see a rally to year-to-date (YTD) highs of 83.45. Further north, the next barrier will emerge at a psychological round mark at 84.00. On the flip side, the key contention level is located at 83.00, representing a low of October 20 and a round figure. A decisive break below the latter could see a drop to 82.82 (low of September 12), en route to 82.65 (low of August 4).

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 Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.02% 0.00% -0.06% -0.13% -0.12% 0.10% 0.01%
EUR 0.03%   0.02% -0.04% -0.11% -0.10% 0.13% 0.03%
GBP -0.01% -0.03%   -0.07% -0.12% -0.13% 0.11% -0.01%
CAD 0.06% 0.04% 0.06%   -0.07% -0.07% 0.17% 0.07%
AUD 0.12% 0.07% 0.11% 0.06%   -0.01% 0.22% 0.13%
JPY 0.12% 0.10% 0.15% 0.04% 0.01%   0.26% 0.13%
NZD -0.10% -0.13% -0.08% -0.16% -0.24% -0.20%   -0.07%
CHF 0.01% -0.05% 0.00% -0.05% -0.12% -0.12% 0.11%  

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).

RBI FAQs

The role of the Reserve Bank of India (RBI), in its own words, is “..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.

The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.

Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at eys levels, and uses derivatives to hedge its positions.

Source: https://www.fxstreet.com/news/usd-inr-loses-traction-on-the-lower-us-yields-eyes-on-us-pce-data-202310270248