Market Data 
- The Indian Rupee trades in negative territory in Tuesday’s Asian session.
- Higher US bond yields and further gains in crude oil prices weigh on the local currency.
- The Federal Reserve’s (Fed) Chairman Jerome Powell’s speech on Tuesday will be closely watched.
The Indian Rupee (INR) edges lower on Tuesday amid the renewed US Dollar (USD) demand and higher US bond yields. Meanwhile, the further rise of crude oil prices amid fears of Middle East geopolitical risks exerts some selling pressure on the INR as India is the world’s third-largest oil consumer after the United States (US) and China.
Nonetheless, the optimism in the Indian economic outlook and portfolio inflows, including the country’s sovereign bonds on account of their inclusion in the JPMorgan emerging market debt index, might lift the local currency and cap the pair’s upside. Investors will closely watch the speech by Federal Reserve (Fed) Chairman Jerome Powell on Tuesday for fresh impetus. On Wednesday, the attention will shift to India’s HSBC Services Purchasing Managers Index (PMI) for June. Any signs of further expansion in the Indian services sector might boost the Indian Rupee and create a headwind for the pair.
Daily Digest Market Movers: Indian Rupee weakens amid higher crude oil prices and US bond yields
- India’s HSBC Manufacturing PMI rose to 58.3 in June from the previous reading of 57.5, weaker than the expectation of 58.5.
- Indian Manufacturing PMI growth was boosted by a record-high rate of job creation. The employment rate was supported by buoyant demand conditions that fueled expansions in new orders, output levels, and procurement activities across the sector.
- Foreign investors bought 16.54 billion rupees ($198.4 million) in Indian bonds under the Fully Accessible Route, lower than the market expected.
- US Manufacturing PMI for June declined to 48.5 from 48.7 in May. This figure came in weaker than the estimation of 49.1, the Institute for Supply Management (ISM) reported Monday.
- Financial markets are now pricing in nearly 59.5% chance of 25 basis points (bps) of Fed rate cut in September, up from 58.2% last Friday, according to CME FedWatch Tool.
Technical analysis: USD/INR might face consolidation or downside in the near term
The Indian Rupee trades weaker on the day. The USD/INR pair remains stuck within the familiar trading range on the daily chart. The bullish trend of the pair remains intact above the key 100-day Exponential Moving Average (EMA). However, further consolidation or downside cannot be ruled out as the 14-day Relative Strength Index (RSI) holds in bearish territory below the 50-midline.
Consistent trading above 83.65, a high of June 26, may take USD/INR back to the all-time high of 83.75. An upside breakout might extend its upswing to the 84.00 psychological level.
On the downside, any follow-through selling below the 100-day EMA of 83.35 might drag the pair lower to the 83.00 round figure. A breach of this level will see a drop to 82.82, a low of January 12.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.02% | 0.39% | 0.68% | 0.17% | 1.21% | 1.07% | 1.18% | |
| EUR | -0.02% | 0.34% | 0.66% | 0.15% | 1.21% | 1.04% | 1.16% | |
| GBP | -0.39% | -0.36% | 0.30% | -0.21% | 0.85% | 0.68% | 0.80% | |
| CAD | -0.69% | -0.66% | -0.30% | -0.51% | 0.55% | 0.39% | 0.51% | |
| AUD | -0.18% | -0.16% | 0.21% | 0.51% | 1.06% | 0.89% | 1.02% | |
| JPY | -1.24% | -1.21% | -0.84% | -0.54% | -1.10% | -0.19% | -0.04% | |
| NZD | -1.08% | -1.05% | -0.69% | -0.39% | -0.90% | 0.17% | 0.12% | |
| CHF | -1.19% | -1.17% | -0.81% | -0.51% | -1.02% | 0.05% | -0.12% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
