- Indian Rupee edges lower amid the recovery in USD.
- Many analysts predicted Q2 Indian GDP to expand faster than the RBI’s 6.5%.
- Investors will monitor the US S&P Global PMI ahead of India’s quarterly growth numbers next week.
Indian Rupee (INR) loses ground on Friday as the US Dollar (USD) attracts some buyers during the session. India’s economy has shown resilience in the face of the global downturn, owing to its dependence on local demand. Many analysts projected the second-quarter (Q2) Indian GDP from the Central Statistical Office to grow faster than the 6.5% expected by the Reserve Bank of India (RBI).
In the meantime, oil prices need to be closely monitored as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will hold their next meeting on November 30 to discuss oil supply cuts. That being said, India is particularly vulnerable to higher crude prices as the country is the world’s third-biggest oil consumer.
The US market was closed on Thursday in observance of Thanksgiving Day, and the trading session on Friday will be shortened. Market players will keep an eye on the US S&P Global PMI data for fresh impetus. Next week, the Indian market will be closed on Monday for the Guru Nanak Jayanti holiday. Nonetheless, the highlight will be India’s Gross Domestic Product (GDP) Quarterly for the second quarter, due on Thursday.
Daily Digest Market Movers: Indian Rupee remains vulnerable to global factors
- According to a Reuters poll of equity strategists, the Indian stock market is set to hit new highs in the next six months and rise over 10% by end-2024.
- The Reserve Bank of India (RBI) Governor Shaktikanta Das estimated a 6.5% growth in India’s real GDP in fiscal years 2023-24 and 2024-25.
- RBI’s Das said the Indian Rupee has shown moderate volatility and orderly movements as compared to its peers despite elevated US Treasury yields and a strong USD.
- RBI’s Das emphasized that India is vulnerable to food-price shocks from extreme weather events and global factors.
- India’s Ministry of Finance said in the report that the government and the RBI will closely monitor inflationary risks.
- RBI projected that average inflation will drop from 6.7% in the previous fiscal year to 5.4% in 2023-24.
- The US S&P Global Manufacturing PMI is estimated to drop from 50.0 to 49.8 and Services PMI is expected to fall from 50.6 to 50.4.
- The US Jobless Claims, Durable Goods Orders, and Consumer Sentiment suggested the economy is easing but remains strong enough to avoid recession.
- Market players believe the Federal Reserve (Fed) may be done raising interest rates and the economy is still resilient.
Technical Analysis: The Indian Rupee maintains its positive outlook
The Indian Rupee trades weaker on the day. The USD/INR pair breaks above the trading range of 82.80–83.35 since September. According to the daily chart, the technical outlook suggests that the bullish bias stays intact as the pair holds above the key 100-day Exponential Moving Average (EMA) with an upward slope. Furthermore, the 14-day Relative Strength Index (RSI) holds above the 50.0 midline, reflecting that further upside looks favorable.
That being said, the year-to-date (YTD) high of 83.47 will be the immediate resistance level for USD/INR, en route to a psychological round mark at 84.00. On the flip side, 83.35 acts as a throwback support. Any follow-through selling below 83.35 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 decisive break below 82.80 will pave the way 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 weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.02% | -0.07% | 0.02% | -0.07% | -0.24% | -0.13% | -0.09% | |
| EUR | 0.03% | -0.05% | 0.05% | -0.04% | -0.20% | -0.10% | -0.07% | |
| GBP | 0.07% | 0.05% | 0.10% | 0.01% | -0.15% | -0.06% | -0.02% | |
| CAD | -0.03% | -0.05% | -0.10% | -0.09% | -0.25% | -0.16% | -0.10% | |
| AUD | 0.06% | 0.04% | -0.01% | 0.10% | -0.17% | -0.07% | -0.02% | |
| JPY | 0.24% | 0.20% | 0.13% | 0.24% | 0.18% | 0.11% | 0.16% | |
| NZD | 0.15% | 0.10% | 0.06% | 0.16% | 0.06% | -0.10% | 0.04% | |
| CHF | 0.09% | 0.07% | 0.02% | 0.12% | 0.02% | -0.12% | -0.04% |
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 economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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