- Indian Rupee trades flat on Monday amid the stronger US Dollar.
- The lower bets on the Fed rate cuts and Indian foreign outflows might underpin the pair.
- The Indian and US Consumer Price Index (CPI) for May will be due on Wednesday.
Indian Rupee (INR) holds steady on Monday despite the rebound of Greenback. The positive outlook of India’s resilient economy and financial stability could provide some support to the INR. However, the robust US employment data for May pared back rate cut expectations from the Federal Open Market Committee (FOMC) might boost the US Dollar (USD) against the INR. Additionally, foreign investors have net sold Indian shares worth 422.81 billion rupees since March, contributing to the Indian Rupee’s weakening.
Investors will monitor the formation of the new government as Narendra Modi was sworn in Sunday for a third consecutive term as India’s Prime Minister. India’s Consumer Price Index (CPI) will be released on Wednesday. On the US docket, the CPI inflation report will be published on Wednesday ahead of the FOMC rate decision on Thursday.
Daily Digest Market Movers: Indian Rupee trades sideways amid mixed sentiment
- The Indian rupee is stable and inexpensive compared to its emerging market peers, making it a favorite for carry traders, said David Hauner, head of global EM fixed-income strategy at Bank of America.
- The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.5% in its June meeting.
- The RBI revised upwards the GDP growth projection for the current fiscal year to 7.2% from 7.0% on rising private consumption and revival of demand in rural areas.
- RBI governor Shaktikanta Das said that although India has contained inflation while keeping its economy growing, food inflation remains a concern.
- The Labor Department showed on Friday that the US economy created far more jobs than expected in May, which dampened the expectation that the US Fed will start cutting interest rates in September.
- The US Nonfarm Payrolls (NFP) climbed 272,000 in May from a 165,000 increase (revised from 175,000) in April and came in above the forecast of 185,000, the Labor Department showed on Friday.
- The Unemployment Rate ticked up to 4.0% in May from 3.9% in April. Meanwhile, wage inflation, as measured by the Average Hourly Earnings, rose 4.1% YoY in May from 4.0% (revised from 3.9%) in April, above the market consensus of 3.9%.
- Futures traders are now pricing in nearly 49% odds of a rate cut for the September meeting, down from 68% before the NFP data, according to the CME FedWatch tool.
Technical analysis: USD/INR keeps the bullish vibe above the 100-day EMA
The Indian Rupee trades stronger on the day. The bullish outlook of the USD/INR pair remains intact above the descending trend channel upper boundary and the key 100-day Exponential Moving Average (EMA) on the daily chart. Further consolidation mode looks favorable since the 14-day Relative Strength Index (RSI) hovers lower towards the 50-midline.
Stronger bullish momentum past 83.55 (high of June 5) might lift the pair up to 83.72 (high of April 17) en route to the 84.00 major psychological mark
On the other hand, the resistance-turned-support level and the 100-day EMA at the 83.30–83.35 region act as an initial support level for USD/INR. Any follow-through selling might drag the pair to the 83.00 round level, followed by 82.78 (low of January 15).
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.26% | 0.14% | 0.09% | -0.11% | 0.19% | 0.01% | 0.12% | |
| EUR | -0.27% | -0.13% | -0.18% | -0.37% | -0.08% | -0.25% | -0.16% | |
| GBP | -0.13% | 0.13% | -0.06% | -0.23% | 0.07% | -0.13% | -0.03% | |
| CAD | -0.09% | 0.18% | 0.05% | -0.19% | 0.12% | -0.07% | 0.02% | |
| AUD | 0.12% | 0.40% | 0.26% | 0.19% | 0.28% | 0.12% | 0.22% | |
| JPY | -0.18% | 0.09% | -0.05% | -0.09% | -0.29% | -0.18% | -0.07% | |
| NZD | -0.02% | 0.25% | 0.12% | 0.07% | -0.12% | 0.17% | 0.09% | |
| CHF | -0.13% | 0.14% | 0.01% | -0.02% | -0.22% | 0.09% | -0.10% |
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 key levels, and uses derivatives to hedge its positions.
