USD/INR posts modest gains, all eyes on Fed rate decision – Crypto News – Crypto News
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USD/INR posts modest gains, all eyes on Fed rate decision USD/INR posts modest gains, all eyes on Fed rate decision

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USD/INR posts modest gains, all eyes on Fed rate decision – Crypto News

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  • Indian Rupee edges lower on the firmer US Dollar ahead of a key US event.
  • The Federal Reserve is widely expected to keep the benchmark overnight rate steady in the 5.25%–5.50% range.
  • Investors await the FOMC interest rate decision and press conference ahead of the Indian Interim Budget 2024. 

Indian Rupee (INR) trades on a softer note on Wednesday. The recovery of the pair is bolstered by safe-haven flow as traders prefer to wait on the sidelines ahead of the Federal Reserve’s Open Market Committee’s (FOMC) interest rate decision.

India has attracted attention with its standout growth trajectory. Indian Chief Economic Adviser, V Anantha Nageswaran, stated that India can aspire to become a $7 trillion economy by 2030. However, the risk of sticky inflation and higher oil prices amid the Middle East geopolitical tension might impact the Indian economy.  

The Federal Reserve is widely anticipated to leave benchmark interest rates unchanged at a 23-year high of 5.25–5.5% at its January meeting. The prospects that the first Fed rate cut will happen at the March meeting have faded as the economy continues to show surprising strength. According to the CME FedWatch Tool, the markets have priced in 85% odds of a rate cut at the May meeting. 

Later on Wednesday, FOMC is set to announce its rate decision at 19.00 GMT and Chairman Jerome Powell will hold a press conference at 19.30 GMT. Powell’s speech could provide information on the central bank’s outlook and offer some hints about the timeline of rate cuts in 2024. Apart from this, India’s S&P Global Manufacturing PMI for January will be due on Thursday. All eyes will be on the Indian Interim Budget 2024 for fiscal year 2024–25. 

Daily Digest Market Movers: Indian Rupee remains resilient amid global headwinds

  • India’s foreign exchange reserves dropped $2.79 billion to $616.14 billion for the week ending on January 19, according to the Reserve Bank of India (RBI). 
  • India’s finance minister will present the federal budget for 2024–25 on Thursday, with expectations that the government will lower its fiscal deficit by at least 50 basis points (bps).
  • The Indian Rupee became the best-performing currency in Asian markets in January 2024, rising by 1% to 2%.
  • The National Statistical Office (NSO) forecasted an Indian growth rate of 7.3% for FY24, compared to 7.2% for FY23. 
  • The number of job openings in the US rose to 9.026 million in December, above the November figure, which was revised up to 8.925 million.
  • The Conference Board Consumer Confidence surged to a two-year high in January, arriving at 114.8 in January versus 108.0 prior.

Technical Analysis: Indian Rupee extends the range-bound theme between 82.78 and 83.45

Indian Rupee weakens on the day. The USD/INR pair consolidates within a two-month-old descending trend channel of 82.78–83.45. USD/INR remains well-supported above the key 100-period Exponential Moving Average (EMA) on the daily chart. However, the bullish outlook of the pair looks vulnerable as the 14-day Relative Strength Index (RSI) hovers around the 50.0 midlines, suggesting the non-directional movement of the pair.

The first resistance level for the pair will emerge at the upper boundary of the descending trend channel at 83.25. A sustained break above the 83.25 level could pave the way to the next bullish targets all the way up to a high of January 2 at 83.35, en route to a 2023 high of 83.47. On the other hand, a bearish breakout below the confluence of the 100-period EMA and a psychological level at the 83.00–83.05 region would signal the bearish momentum back to a low of December 18 at 82.90, followed by the lower limit of the descending trend channel at 82.72.

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 strongest against the Euro.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.22% 0.15% -0.27% 0.21% -0.30% -0.34% -0.14%
EUR -0.22%   -0.06% -0.47% -0.02% -0.49% -0.55% -0.35%
GBP -0.16% 0.05%   -0.43% 0.04% -0.44% -0.50% -0.31%
CAD 0.26% 0.47% 0.41%   0.45% -0.02% -0.07% 0.13%
AUD -0.18% 0.02% -0.04% -0.46%   -0.47% -0.52% -0.32%
JPY 0.30% 0.50% 0.58% 0.02% 0.44%   -0.06% 0.16%
NZD 0.34% 0.56% 0.49% 0.07% 0.52% 0.04%   0.20%
CHF 0.13% 0.34% 0.29% -0.13% 0.35% -0.15% -0.19%  

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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