Risk-off mood warrants establishment above 80.00, US NFP buzz

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USD/INR loses ground on stronger Indian GDP, focus on US PMI, Fed’s Powell speech – Crypto News

Published

1 year ago

December 1, 2023

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Indian Rupee gains momentum on the upbeat Indian growth number.
India’s GDP expanded by 7.6% for the Q2 of this fiscal year, making it the fastest-growing major economy.
Investors will closely watch the US ISM Manufacturing PMI and Fed Chair Jerome Powell’s speech later on Friday.

Indian Rupee (INR) gathers strength on Friday, bolstered by the stronger-than-expected India’s growth number. The country’s GDP expanded 7.6% in the September quarter of this fiscal year and remained the fastest-growing major economy, according to the statistics ministry on Thursday. The expansion in the Indian economy was boosted by government spending and robust performance in the manufacturing, mining, and construction sectors. This reading came in better than the projections of 6.5% by the Reserve Bank of India (RBI).

Despite inflation falling to a four-month low of 4.87% in October, it is expected to remain above the RBI’s 4% target for the next two years. The markets anticipate the RBI to remain hawkish in its upcoming policy and will keep its key interest rate unchanged at 6.50% for a fifth consecutive meeting.

Market players will focus on the US ISM Manufacturing PMI for November, due on Friday. The figure is expected to grow to 47.6 from 46.7. Furthermore, Fed Chair Jerome Powell is set to speak. Market anticipation has become more aggressive regarding Fed policy easing, with Fed funds futures now pricing five quarter-percentage-point rate cuts next year, according to the CME Group.

Daily Digest Market Movers: Indian Rupee trades on the front foot despite multiple global headwinds

The Indian economy grew 7.6% in the July–September quarter of the current fiscal year 2023-24, remaining the world’s fastest-growing major economy.
India’s fiscal deficit from April to October was 8.04 trillion Indian Rupees or 45% of the estimate for the whole year.
Indian Prime Minister Narendra Modi said on Thursday that the GDP growth data for the second quarter of the current fiscal year demonstrated the Indian economy’s resilience and strength in the face of global challenges.
Domestic demand in India continues to be the primary driver of economic activity, as external demand remains fragile.
The Reserve Bank of India (RBI) is likely to maintain its key interest rate unchanged at 6.50% for a fifth consecutive meeting on December 8, according to a Reuters poll.
US Core Personal Consumption Expenditures Price Index (Core PCE), the Federal Reserve’s preferred inflation gauge rose 0.2% MoM and 3.5% YoY in October.
US Initial weekly Jobless Claims rose to 218K from the previous period week of 211K, below the 220K expected while the Continuing Claims surged to 1.930 million versus the 1.841 decline prior.
US Gross Domestic Product Annualized for the third quarter (Q3) expanded 5.2% in the third quarter (Q3) from 4.9% in the previous reading, better than 5.0% estimated.

Technical Analysis: The Indian Rupee maintains its positive view

Indian Rupee edges higher on the day. The USD/INR pair has traded within a familiar range of 82.80–83.40 since September. Technically, USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the upward momentum is reinforced by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline.

The upper boundary of the trading range at 83.40 acts as an immediate target for USD/INR bulls. Any follow-through buying will see the next hurdle at the year-to-date (YTD) high of 83.47, en route to a psychological round mark of 84.00. On the downside, the critical contention level will emerge at the 83.00 psychological mark. A breach of this level will pave the way to the confluence of the lower limit of the trading range and a low of September 12 at 82.80, followed by a low of August 11 at 82.60.

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 New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.14%	-0.12%	-0.11%	-0.10%	-0.03%	-0.25%	-0.07%
EUR	0.14%		0.00%	0.03%	0.04%	0.10%	-0.11%	0.08%
GBP	0.12%	-0.01%		0.01%	0.02%	0.09%	-0.13%	0.06%
CAD	0.11%	-0.02%	-0.01%		0.01%	0.07%	-0.13%	0.06%
AUD	0.10%	-0.03%	-0.02%	0.00%		0.06%	-0.15%	0.04%
JPY	0.03%	-0.08%	-0.10%	-0.08%	-0.04%		-0.20%	-0.02%
NZD	0.24%	0.11%	0.12%	0.13%	0.15%	0.22%		0.20%
CHF	0.06%	-0.10%	-0.08%	-0.06%	-0.05%	0.01%	-0.20%

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.