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- Indian Rupee flat-lines on the mild losses of the US Dollar.
- Indian inflation expectations may edge down, but renewed pressures from cereals and proteins cannot be ruled out, RBI bulletin said.
- The RBI MPC Meeting Minutes, and US S&P Global PMI report will be due on Thursday.
Indian Rupee (INR) trades on a flat note on Thursday amid the modest decline of the Greenback. According to the RBI February bulletin, while inflation expectations in India may stabilize and edge down, renewed pressures from cereals and proteins remain a possibility. Retail inflation in January eased to a three-month low of 5.1% from 5.69% in December. The Reserve Bank of India (RBI) maintained interest rates and its policy stance unchanged while reiterating its commitment to meeting the 4% inflation target on a sustainable basis.
Meanwhile, a rise in oil prices amid the concerns over attacks on ships in the Red Sea and growing expectations that cuts to U.S. interest rates will take longer than thought might lift the safe-haven US Dollar (USD) and cap the downside of the USD/INR pair.
Investors will take more cues from RBI MPC Meeting Minutes on Thursday. On the US docket, the S&P Global PMI, weekly Initial Jobless Claims, Existing Home Sales, and the Chicago Fed National Activity Index will be due. Also, the Fed’s Cook, Kashkari, Jefferson, and Harker are scheduled to speak later in the day.
Daily Digest Market Movers: Indian Rupee remains sensitive to the high inflation and geopolitical risks
- India’s S&P Global Services PMI improved to 62.0 in February from 61.8 in January.
- The Indian economy continues to sustain the momentum achieved in the first half of 2023-24, according to the Reserve Bank of India’s (RBI) monthly bulletin.
- The bond issuance since January is almost half the $3.3 billion issued in all of 2023. Traders have bought around 350 billion rupees ($4.22 billion) of bonds on a net basis so far in 2024 after purchases in 2023 jumped to a six-year high.
- The RBI expects India’s debt-to-GDP ratio to decrease to 73.4% by 2030-31, a notable improvement from the IMF’s forecast of 78.2%.
- The FOMC Minutes indicate that no rate cuts would be coming until the rate-setting FOMC held “greater confidence” that inflation was receding.
- Fed officials noted that they wanted to see more before starting to ease policy while saying that rate hikes are likely over. Members cited the risks of moving too quickly on cuts.
- The US Services PMI is expected to slightly ease to 52.0 in February from 52.5 in January, while the Manufacturing PMI is forecast to drop to 50.5 versus 50.7 prior.
Technical Analysis: Indian Rupee remains capped within the longer-term band of 82.70-83.20
Indian Rupee trades flat on the day. USD/INR remains confined within a multi-month-old descending trend channel between 82.70 and 83.20 since December 8, 2023.
In the near-term, USD/INR maintains its bearish bias as the pair is below the key 100-day Exponential Moving Average (EMA) on the daily chart. The downward momentum is supported by the 14-day Relative Strength Index (RSI) lies below the 50.0 midline, signaling the path of least resistance is to the downside.
USD/INR has found an initial support level around a low of February 20 at 82.85. The potential contention level will emerge near the lower limit of the descending trend channel at 82.70. A bearish breakout below this level will see a drop to a low of August 23 at 82.45.
On the upside, a decisive break above the support-turned-resistance near the 83.00 mark could lead USD/INR heading back to the upper boundary of the descending trend channel at 83.20. Further north, the next upside filter to watch is a high of January 2 at 83.35, followed by the 84.00 psychological level.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.92% | -0.58% | -0.41% | -0.91% | -0.19% | -1.69% | -0.81% | |
| EUR | 0.92% | 0.32% | 0.51% | 0.01% | 0.73% | -0.76% | 0.13% | |
| GBP | 0.59% | -0.34% | 0.17% | -0.33% | 0.39% | -1.11% | -0.22% | |
| CAD | 0.40% | -0.51% | -0.17% | -0.50% | 0.23% | -1.28% | -0.37% | |
| AUD | 0.93% | -0.01% | 0.34% | 0.50% | 0.71% | -0.77% | 0.12% | |
| JPY | 0.20% | -0.73% | -0.40% | -0.21% | -0.74% | -1.51% | -0.61% | |
| NZD | 1.67% | 0.77% | 1.11% | 1.27% | 0.77% | 1.48% | 0.89% | |
| CHF | 0.78% | -0.13% | 0.20% | 0.38% | -0.12% | 0.61% | -0.89% |
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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