USD/INR loses momentum ahead of US CPI data – Crypto News – Crypto News
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USD/INR loses momentum ahead of US CPI data – Crypto News

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  • Indian Rupee attracts some buyers on the weaker USD and robust foreign inflows.
  • India is on track to become one of the top three global economies, Indian Prime Minister Modi said.
  • The US Consumer Price Index (CPI) for December will be a closely watched event on Thursday.

Indian Rupee (INR) trades on a positive note on Thursday, supported by robust foreign inflows. On Wednesday, India’s Prime Minister Narendra Modi stated that India is set to become one of the top three global economies. Modi acknowledged India’s economic development as a decade of structural reforms that improved the country’s capacity and competitiveness amid global headwinds.

The highlight on Thursday will be the US inflation report, as measured by the Consumer Price Index (CPI). The stronger-than-expected inflation data could lift the US Dollar and potentially delay a rate cut from the Federal Reserve (Fed). On Friday, attention will shift to the December Indian CPI, Industrial Production, and Manufacturing Output.

Daily Digest Market Movers: Indian Rupee remains strong amid challenges from external factors

  • The Indian government plans to cut its fiscal deficit by at least 50 basis points (bps) in fiscal year 2025.
  • The Indian government plans to increase capital spending by up to 20% in fiscal year 2025.
  • On February 1, Finance Minister Nirmala Sitharaman will unveil the 2024/25 budget.
  • The World Bank kept its FY25 economic growth projection for India unchanged at 6.4%, owing to strong domestic demand, rising public infrastructure spending, and strong private-sector credit growth.
  • Bloomberg Index Services proposed including eligible Indian bonds in its emerging market local currency index from September.
  • Finance Minister Nirmala Sitharaman said on Wednesday that India is estimated to be a $5 trillion economy by 2027–28 and become the third largest economy.
  • New York Federal Reserve (Fed) President John Williams said that interest rates in the US will likely need to stay high “for some time” until the central bank is confident that inflation is returning to 2%.
  • Atlanta Fed Bank President Raphael Bostic emphasized that monetary policy needs to stay tight while inflation remains above the 2% target. Fed’s Bowman stated that the policy is sufficiently restrictive.
  • The US Consumer Price Index (CPI) data for December will be due on Thursday at 13:30 GMT. The Core CPI is estimated to show an increase of 3.8% YoY, while headline inflation is projected to grow 3.2% YoY versus 3.1% prior.

Technical Analysis: Indian Rupee could see a downleg in the shorter term

Indian Rupee trades strongly on the day. The USD/INR pair remains stuck within a multi-month trading range between 82.80 and 83.40. According to the daily chart, USD/INR resumes a bearish outlook in the shorter timeframe as the pair holds below the key 100-period Exponential Moving Average (EMA). Additionally, the downward momentum is supported by the 14-day Relative Strength Index (RSI) that stands below the 50.0 midpoint.

A breach below the 83.00 psychological level will see a drop to the critical contention level at 82.80, portraying the confluence of the lower limit of the trading range and a low of September 12. Further south, the next downside target is located at a low of August 11 at 82.60. On the other hand, the immediate resistance level for USD/INR will emerge near the upper boundary of the trading range at 83.40. A break above 83.40 will expose a 2023 high of 83.47, followed by the psychological figure at 84.00.

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 Pound Sterling.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.35% -0.40% -0.02% -0.09% 0.44% -0.09% -0.13%
EUR 0.34%   -0.04% 0.34% 0.27% 0.80% 0.27% 0.21%
GBP 0.38% 0.03%   0.37% 0.30% 0.83% 0.30% 0.25%
CAD 0.01% -0.33% -0.38%   -0.07% 0.49% -0.07% -0.10%
AUD 0.07% -0.27% -0.31% 0.07%   0.55% 0.00% -0.04%
JPY -0.47% -0.79% -0.86% -0.44% -0.52%   -0.52% -0.58%
NZD 0.07% -0.27% -0.31% 0.07% 0.00% 0.53%   -0.04%
CHF 0.10% -0.25% -0.29% 0.13% 0.03% 0.55% 0.02%  

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.

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