- Indian Rupee loses ground despite the weaker USD, lower oil prices.
- RBI’s Das said the Indian Rupee has witnessed “low volatility” and orderly movements as compared to its peers.
- Das estimates India’s real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25.
Indian Rupee edges lower on Thursday despite the decline in oil prices and softer US Dollar (USD). On Wednesday, the Reserve Bank of India (RBI) Governor Shaktikanta 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. Nonetheless, RBI will continue to closely monitor external financial factors that have potentially impacted the value of INR and the nation’s balance of payments.
Furthermore, RBI Governor Das expressed optimism about India’s economy as the country has demonstrated resilience despite a global slowdown and largely due to its reliance on domestic demand. Das estimates India’s real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25 due to its robust growth rate, ranking the country among the fastest-growing large economies in the world.
Markets remain subdued on Thursday as traders prepare for the Thanksgiving Day holiday in the US. On Friday, the attention will shift to the US S&P Global PMI data. Meanwhile, the foreign fund’s outflows and higher oil prices might cap the INR’s upside in the near term.
Daily Digest Market Movers: Indian Rupee remains sensitive to the multiple headwinds
- Reserve Bank of India (RBI) Governor Shaktikanta Das forecasted India’s real GDP to grow by 6.5% in fiscal years 2023-24 and 2024-25.
- RBI’s Das said its monetary policy will pursue disinflation to progressively align inflation to the target while supporting growth.
- RBI’s Das further stated India is vulnerable to food-price shocks from extreme weather events and global factors despite a recent moderation in prices.
- India’s Ministry of Finance said in the report that the government and the RBI remain on high alert over inflationary risks.
- Indian central bank, which maintained the interest rate over the last four meetings, anticipates that average inflation will decline to 5.4% in 2023-24 from 6.7% in the last fiscal year.
- RBI raised its gold holdings by nine tonnes during the September 2023 quarter, bringing the total to 337 tonnes amassed by central banks worldwide.
- The US weekly Jobless Claims unexpectedly fell to 209K, the biggest fall since June. Continuing Claims dropped to 1.840M versus 1.862M prior.
- The University of Michigan Consumer Sentiment Index climbed to 61.3 in November from an initial reading of 60.4, better than the market expectation of 60.5.
- The UoM 1-year inflation expectations rose to 4.5% from the preliminary 4.4%. The 5–year inflation expectations were steady at 3.2%.
- The FOMC minutes showed all participants agreed to “proceed carefully” and policy decisions at every meeting would continue to be based on the totality of incoming information and economic outlook as well as the balance of risks.
Technical Analysis: The Indian Rupee keeps a positive outlook intact
The Indian Rupee trades weaker on the day. The USD/INR pair has traded within the 82.80–83.35 range since September. The technical outlook suggests that the path of least resistance is to the upside as the pair holds above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) holds above the 50.0 midline, suggesting that further upside looks favorable.
The first resistance level for USD/INR will emerge at 83.35 (the upper boundary of the trading range). If the buyers reclaim the latter, further upside is seen at the year-to-date (YTD) high of 83.47. The next hurdle to watch is a psychological round figure at 84.00.
On the downside, the contention level is located at 82.80. The mentioned level is the confluence of the lower limit of the trading range and a low of September 12. A decisive break below 82.80 will pave the way to a low of August 11 at 82.60. The additional downside filter to watch is a low of August 24 at 82.37.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.47% | -0.68% | -0.01% | -0.68% | -1.40% | -0.41% | -0.50% | |
| EUR | 0.46% | -0.22% | 0.44% | -0.23% | -0.92% | 0.05% | -0.04% | |
| GBP | 0.67% | 0.22% | 0.68% | -0.01% | -0.72% | 0.28% | 0.17% | |
| CAD | 0.03% | -0.40% | -0.66% | -0.69% | -1.37% | -0.39% | -0.47% | |
| AUD | 0.68% | 0.22% | 0.01% | 0.66% | -0.71% | 0.27% | 0.19% | |
| JPY | 1.38% | 0.92% | 0.71% | 1.38% | 0.71% | 0.97% | 0.88% | |
| NZD | 0.41% | -0.04% | -0.27% | 0.41% | -0.27% | -0.98% | -0.09% | |
| CHF | 0.48% | 0.03% | -0.18% | 0.49% | -0.19% | -0.91% | 0.08% |
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.