- The Indian rupee fell in the early morning session of European markets on Tuesday.
- End of month demand for US dollar and rising crude oil prices weighed on the Indian rupee.
- Traders are awaiting the release of the U.S. central bank's consumer confidence index for August ahead of key events scheduled for later this week.
The Indian Rupee (INR) is trading weakly on Tuesday. Month-end demand for US Dollar (USD) from domestic banks and corporates and rising crude oil prices are likely to limit INR appreciation. Meanwhile, dovish comments by US Federal Reserve Chairman Jerome Powell at the Jackson Hole Symposium have raised the chances of a significant interest rate cut at the September meeting, which may limit INR appreciation.
Investors will be keeping an eye on the US Conference Board's August Consumer Sentiment Index, due to be released on Tuesday. This week, data on the second-quarter (Q2) US Gross Domestic Product (GDP) Annualized Index and the Personal Consumption Expenditures (PCE) Price Index will be in focus. India's Q1 GDP quarterly figures will be released on Friday.
Daily Digest Market Trends: Indian Rupee remains weak amid global factors and challenges
- “We expect the rupee to see a slight positive swing on global risk sentiment following dovish comments from the Fed and rising expectations of a rate cut by the Fed in September. However, geopolitical tensions in the Middle East and rising oil prices may cap any sharp upside,” said Anuj Choudhury, research analyst at BNP Paribas Sharecan.
- India's economic growth likely expanded at its slowest pace in a year in the April-June quarter due to a drop in government spending, according to a Reuters poll.
- “The time has come to lower interest rates,” San Francisco Federal Reserve President Mary Daly said on Monday, possibly starting with a 0.25 percentage point cut in borrowing costs, according to Reuters.
- Richmond Fed President Thomas Barkin said Monday that the bank will take a “trial and learn” approach to cutting interest rates.
- U.S. durable goods orders increased by $26.1 billion, or 9.9%, to $289.6 billion in July after declining 6.9% in June. This figure beat the market consensus of a 4% increase and marked the biggest increase since May 2020.
- Futures markets are currently pricing in a nearly 40% chance of a half-percentage point cut in interest rates.
Technical analysis: USD/INR remains bullish in the long term
The Indian Rupee traded weakly on the day. The USD/INR pair maintained a positive outlook by staying above the crucial 100-day Exponential Moving Average (EMA) on the daily chart. However, the price is below the three-month old ascending trend line and the 14-day Relative Strength Index (RSI) is hovering near the midline, suggesting that further consolidation cannot be ruled out.
The psychological support level at 84.00 is turning into a resistance level and will act as an immediate upside barrier for USD/INR. If it goes further up, the next target is the record high of 84.24 on the way to 84.50.
On the downside, the first support is at 83.77, which was the low of August 20. Below this level, the pair can drop to the 100-day EMA at 83.57.
US Dollar Price for the Last 7 Days
The table below shows the percentage change of the US Dollar (USD) and major listed currencies over the past 7 days: The US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | Australian Dollar | JPY | NZD | Swiss Franc | |
| USD | -0.69% | -1.57% | -1.09% | -0.67% | -1.28% | -1.64% | -1.75% | |
| EUR | 0.68% | -0.87% | -0.40% | 0.00% | -0.60% | -0.95% | -1.06% | |
| GBP | 1.55% | 0.87% | 0.47% | 0.89% | 0.28% | -0.07% | -0.18% | |
| CAD | 1.08% | 0.40% | -0.47% | 0.42% | -0.20% | -0.54% | -0.65% | |
| Australian Dollar | 0.67% | -0.01% | -0.89% | -0.42% | -0.63% | -0.96% | -1.06% | |
| JPY | 1.22% | 0.60% | -0.27% | 0.21% | 0.61% | -0.41% | -9944.07% | |
| NZD | 1.62% | 0.94% | 0.08% | 0.54% | 0.97% | 0.34% | -0.06% | |
| Swiss Franc | 1.72% | 1.05% | 0.17% | 0.65% | 1.06% | 0.46% | 0.11% |
The heat map displays the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Euro from the left column and move it along the horizontal line to Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Frequently asked questions about Indian Rupee
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. Oil prices (India is heavily dependent on imported crude oil), the value of the US Dollar (most trade is conducted in US Dollars) and the level of foreign investment are all influential. The Reserve Bank of India's (RBI) direct intervention in the FX market to stabilize the exchange rate, and the interest rate levels set by the RBI are also major factors affecting the rupee.
The Reserve Bank of India (RBI) actively intervenes in the foreign exchange market to maintain a stable exchange rate and encourage trade. In addition, the RBI tries to keep inflation at a target of 4% by adjusting interest rates. When interest rates rise, the rupee usually appreciates. This is due to the role of the “carry trade” where investors borrow in countries with low interest rates and park the funds in countries with relatively high interest rates, profiting from the difference.
Macroeconomic factors that affect the value of the rupee include inflation, interest rates, economic growth (GDP), trade balance, and foreign investment inflows. Higher growth rates lead to more foreign investment, which in turn increases the demand for the rupee. A lower trade deficit ultimately strengthens the rupee. An increase in interest rates, especially real interest rates (interest rates minus inflation), is also positive for the rupee. A risk-on environment leads to higher foreign direct investment (FDI) and foreign indirect investment (FII) inflows, which also benefits the rupee.
Rising inflation, especially when it is high in India relative to the rest of the world, is generally negative for the currency as it reflects a fall in the value of the currency due to excess supply. Inflation also increases export costs, leading to more rupees being sold to buy foreign imports, which is negative for the rupee. At the same time, rising inflation typically leads to interest rate hikes by the Reserve Bank of India (RBI), which can be positive for the rupee due to increased demand from international investors. Low inflation has the opposite effect.
