- Indian Rupee loses ground on the renewed US Dollar demand on Monday.
- The Reserve Bank of India (RBI) anticipated a 6.5% expansion in the Indian economy from July to September.
- Indian GDP data (Q2) and US growth numbers (Q3) will be the highlight this week.
Indian Rupee (INR) edges lower on Monday amid US Dollar (USD) demand. IPO-related inflows offered some support to the Indian rupee last week, but the INR struggled to gain ground as the sustained Dollar demand from domestic firms kept the pressure on. Underlying growth trends continue to look robust in India, with activity underpinned by domestic consumption.
Retail inflation has slowed as a result of monetary policy and supply-side initiatives. The Reserve Bank of India (RBI) had projected 6.5% growth in the Indian economy for July to September. RBI Governor Shaktikanta Das said the growth figure would surprise on the upside.
However, RBI’s Das said the Indian economy is still not out of the woods and has a long way to go. Additionally, a global economic slowdown and a decrease in government capital expenditure could potentially moderate the nation’s growth trajectory.
The Indian market is closed on Monday for the Guru Nanak Jayanti holiday. The spotlight this week will be India’s Gross Domestic Product (GDP) Quarterly for the second quarter (Q2) and the US GDP data for Q3. Additionally, the Indian Fiscal Deficit data, RBI Monetary and Credit Information Review, and Infrastructure Output will be released. Furthermore, the last phase of state elections on Thursday might trigger volatility in the market in the near term.
Daily Digest Market Movers: Indian Rupee remains vulnerable amid the potential global economic slowdown
- The Indian economy is expected to expand faster than expected in the second quarter due to robust urban consumption and expansion in services.
- The Indian stock market is likely to reach new highs in the next six months and grow by more than 10% by the end of 2024, according to a Reuters poll of equities analysts.
- The Reserve Bank of India (RBI) had estimated 6.5% growth for July-September, with RBI Governor Shaktikanta Das stating that the growth figure would surprise on the upside.
- Earlier, the S&P Global India Manufacturing PMI unexpectedly dropped to 55.5 in October 2023 from 57.5 in the previous reading.
- The US S&P Global Composite PMI held steady at 50.7 in November.
- The Manufacturing PMI fell to 49.4 from 50.0, worse than the expectation of 49.8 while the Services PMI climbed to 50.8 from 50.6 the previous month, above the market expectation of 50.4.
Technical Analysis: The Indian Rupee keeps a positive stance
The Indian Rupee trades firmer on the day. The USD/INR pair has traded within a wider range of 82.80–83.40 since September. USD/INR maintains the bullish vibe as the pair holds above the key 100-day Exponential Moving Average (EMA) with an upward slope on the daily chart. This upward momentum is supported by the 14-day Relative Strength Index (RSI) that holds above the 50.0 midline, reflecting that further upside looks favorable.
The upper boundary of the trading range at 83.40 will be the immediate resistance level for USD/INR. Further north, the next hurdle is seen at the year-to-date (YTD) high of 83.47, en route to a psychological round figure of 84.00. On the downside, 83.00 acts as a key contention level. Any follow-through selling below the 83.00 psychological level will see a drop to the confluence of the lower limit of the trading range and a low of September 12 at 82.80. A breach of this level will drag the pair to 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 strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.04% | -0.02% | 0.18% | 0.13% | -0.41% | 0.19% | -0.02% | |
| EUR | 0.04% | 0.03% | 0.22% | 0.17% | -0.36% | 0.23% | 0.02% | |
| GBP | 0.02% | -0.02% | 0.20% | 0.15% | -0.39% | 0.21% | -0.01% | |
| CAD | -0.17% | -0.21% | -0.19% | -0.05% | -0.59% | 0.02% | -0.21% | |
| AUD | -0.13% | -0.17% | -0.15% | 0.05% | -0.54% | 0.06% | -0.15% | |
| JPY | 0.41% | 0.38% | 0.32% | 0.59% | 0.55% | 0.61% | 0.40% | |
| NZD | -0.19% | -0.23% | -0.21% | -0.01% | -0.06% | -0.59% | -0.21% | |
| CHF | 0.02% | -0.01% | 0.01% | 0.21% | 0.16% | -0.38% | 0.22% |
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).
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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