Market Data 
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- Indian Rupee rebounds on Monday on the softer USD.
- The Indian HSBC Manufacturing PMI dropped to 57.5 in May from 58.4 in April.
- The success of Narendra Modi’s (BJP) third-term election might boost the INR.
- The final reading on Indian and US Manufacturing PMI for May will be in the spotlight on Monday.
Indian Rupee (INR) recovers on Monday amid the weaker US dollar (USD). On Friday, the INR closed the week with its worst weekly performance in over two months, pressured by month-end USD demand from importers. However, the decline of the INR might be limited as the Reserve Bank of India (RBI) is likely to intervene in the local currency from depreciation. The recent economic data showed that India’s Manufacturing Purchasing Managers Index (PMI) for May came in weaker than expected, dropping to 57.5 from 58.4 in April.
However, the downbeat Indian PMI data had little to no impact on the INR as investors await India’s general election outcome, with vote counting on June 4. Analysts expect the Indian Rupee to rally this week as exit polls revealed Prime Minister Narendra Modi’s Bharatiya Janata Party would win a third term.
On the US docket, the ISM Manufacturing PMI will be released. The stronger-than-expected reading might dampen the expectation of the Federal Reserve (Fed) rate cut this year and boost the Greenback.
Daily Digest Market Movers: Indian Rupee gains ground ahead of India’s general election result
- Indian equity benchmark indices opened at a record high on Monday with the Nifty 50 up 3.58% or 807.20 points higher at 23,337.70 and Sensex up 2621.98 points, or 3.55% higher at 76,583.30, per the Indian Express.
- Most exit polls projected the governing NDA would win a two-thirds majority in the 543-member lower house of parliament, where 272 is required for a simple majority.
- The 10-year Indian government bond yield closed Friday at 6.9809%, marking the sixth straight weekly decline and having its biggest monthly loss in four years.
- The US Personal Consumption Expenditures (PCE) Price Index came in as expected, advancing 0.3% on a monthly basis in April and rising 2.7% on a yearly basis.
- The Core PCE, excluding the volatile food and energy, rose 0.2% MoM in April, compared to a 0.3% gain in March. On an annual basis, the core PCE price index climbed 2.8% for the third consecutive month.
- Personal Income rose 0.3% on a monthly basis in April, while Personal Spending grew by 0.2%.
- The US ISM Manufacturing PMI is expected to improve to 49.8 in May from 49.2 in April.
Technical analysis: USD/INR’s bullish outlook prevails
The Indian Rupee trades stronger on the day. The USD/INR pair keeps the bullish vibe above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is supported by the 14-day Relative Strength Index (RSI), which stands around 55.0, supporting the buyers for the time being.
A decisive break above a descending trend channel that has been established since mid-April at 83.40 will see a rally to 83.54 (high of May 13), followed by 83.72 (high of April 17), and finally at 84.00 (psychological mark).
On the flip side, the 100-day EMA around 83.21 acts as an initial support level for USD/INR. The key contention level to watch is the 83.00 round figure, A breach of the mentioned level could expose 82.78 (low of January 15).
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 weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.05% | -0.05% | -0.31% | -0.38% | 0.36% | -0.44% | -1.46% | |
| EUR | 0.05% | 0.00% | -0.26% | -0.33% | 0.41% | -0.39% | -1.41% | |
| GBP | 0.05% | -0.01% | -0.27% | -0.34% | 0.40% | -0.40% | -1.42% | |
| CAD | 0.31% | 0.26% | 0.27% | -0.07% | 0.67% | -0.13% | -1.16% | |
| AUD | 0.38% | 0.33% | 0.33% | 0.07% | 0.74% | -0.06% | -1.08% | |
| JPY | -0.35% | -0.41% | -0.40% | -0.69% | -0.76% | -0.80% | -1.83% | |
| NZD | 0.42% | 0.37% | 0.37% | 0.11% | 0.04% | 0.78% | -1.04% | |
| CHF | 1.43% | 1.38% | 1.39% | 1.12% | 1.06% | 1.79% | 1.00% |
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.
