- The Indian Rupee receives support due to expected inflows of foreign investments.
- Indian bonds are scheduled to be included in the JP Morgan Emerging Market Bond Index on June 28.
- Higher crude prices limit the upside of the INR as India is the world’s third-largest Oil consumer.
The Indian Rupee (INR) held its ground on Wednesday after two days of gains. The INR received support from expectations of foreign inflows, as Indian bonds are set to enter the JP Morgan Emerging Market (EM) Bond Index on June 28. However, the upside for the Indian Rupee was restrained by month-end dollar demand from importers.
The US Dollar remains calm after posting gains on Tuesday. The advance of the US Treasury yields supported the Greenback. The recent comments by Federal Reserve (Fed) officials indicated that the central bank is not in a rush to start its rate-cutting cycle.
Investors turn cautious ahead of key US economic data releases later this week. The revised US Gross Domestic Product (GDP) for the first quarter (Q1) is scheduled to be released on Thursday, followed by the Personal Consumption Expenditure (PCE) Price Index on Friday.
Daily Digest Market Movers: Indian Rupee remains firm due to inflows of foreign investments
- Foreign investors have already invested approximately $10 billion into the securities eligible to join JPMorgan’s index on June 28, according to Business Standard. Meanwhile, Goldman Sachs anticipates at least $30 billion more in inflows in the coming months as India’s weighting on the index steadily rises to 10%.
- The rise in crude oil prices, driven by expectations of strong summer driving demand, could pressure the Indian Rupee. As the world’s third-largest oil consumer after the United States and China, India is significantly impacted by fluctuations in oil prices.
- Reuters cited Fed Governor Michelle Bowman repeating her view on Tuesday that holding the policy rate steady for some time will likely be enough to bring inflation under control. Meanwhile, Fed Governor Lisa Cook said it would be appropriate to cut interest rates “at some point” given significant progress on inflation and a gradual cooling of the labor market, though she remained vague about the timing of the easing.
- The S&P Global Ratings retained its growth forecast for India at 6.8% for FY25, citing high interest rates and government spending boosting demand in the non-agricultural sectors.
- India is expected to become a $4 trillion economy in 2025, surpassing Japan by early next fiscal year to become the world’s fourth largest economy, according to Indian Economic Advisory Council to the Prime Minister (EAC-PM) member Sanjeev Sanyal.
Technical analysis: USD/INR hovers around the level of 83.50
The USD/INR trades around 83.50 on Wednesday. The daily chart analysis shows a broadening pattern, representing increasing volatility. This chart pattern suggests a potential correction before moving lower. The 14-day Relative Strength Index (RSI) is positioned below the 50 level, indicating a bearish bias.
The immediate support appears at the 50-day Exponential Moving Average (EMA) at 83.40. A break below this level could exert pressure on the USD/INR pair to navigate the region around the lower boundary of the broadening bottom around the level of 83.30.
On the upside, the USD/INR pair may find resistance at the upper boundary of the broadening formation around the level of 83.70, followed by the psychological level of 84.00.
USD/INR: Daily Chart
US Dollar price today
The table below shows the percentage change of the US Dollar (USD) against listed major currencies today. The US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.05% | -0.05% | -0.49% | 0.07% | 0.01% | -0.06% | |
| EUR | 0.03% | -0.02% | -0.02% | -0.46% | 0.11% | 0.04% | -0.03% | |
| GBP | 0.05% | 0.02% | -0.01% | -0.43% | 0.13% | 0.06% | -0.01% | |
| CAD | 0.05% | 0.02% | 0.01% | -0.43% | 0.13% | 0.08% | 0.00% | |
| AUD | 0.48% | 0.43% | 0.42% | 0.42% | 0.55% | 0.49% | 0.45% | |
| JPY | -0.07% | -0.11% | -0.14% | -0.13% | -0.55% | -0.08% | -0.13% | |
| NZD | -0.03% | -0.07% | -0.08% | -0.08% | -0.52% | 0.07% | -0.05% | |
| CHF | 0.05% | 0.03% | 0.01% | 0.00% | -0.43% | 0.13% | 0.08% |
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).
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
