USD/INR posts modest gains following Indian PMI data

Indian Rupee struggles to gain ground on Monday amid a stronger USD. 
India’s HSBC Manufacturing PMI came in at 59.1 against 56.9 prior, worse than expected.
Several polls showed the RBI would maintain the repo rate steady at 6.50% in the forthcoming meeting on Friday. 

Indian Rupee (INR) trades with mild negative bias on Tuesday, despite the firmer US Dollar (USD) and weaker-than-expected Indian data. India’s HSBC Manufacturing Purchasing Managers Index (PMI) data rose to 59.1 in March from the flash estimate of 56.9, below the market consensus of 59.2. The INR loses some ground after the release of PMI data.

The Reserve Bank of India (RBI) will schedule its first bi-monthly monetary policy meeting for Wednesday to Friday. Various polls indicate that the RBI will keep the repo rate steady at 6.50% in the upcoming meeting as it weighs robust domestic economic growth prospects amid sticky food inflation, while Fed officials hinted at potential rate cuts later this year. The high-for-longer rate narrative in India might lift the INR and create a tailwind for the USD/INR pair. Looking ahead, all eyes will be on the RBI interest rate decision and the US March Nonfarm Payrolls on Friday. 

Daily digest market movers: Indian Rupee remains weak amid uncertainties

India’s Prime Minister Narendra Modi said on Monday that the RBI must prioritize the country’s economic growth and also ensure the rupee is made more accessible and acceptable globally. ”
India’s GDP will be the fastest expanding among the G-20 countries by 2024. In the previous three quarters, India’s GDP grew by 7.8% in Q1, 7.6% in Q2, and 8.4% in Q3.
The US ISM Manufacturing PMI climbed to 50.3 in March from 47.8 in the previous reading, above the market consensus of 48.4. The reading registered the highest level since September 2022, with increased production and new orders,
Investors have priced in nearly 61% odds of the Fed cutting rates by 25 basis points (bps) in June, up from 55.2 before the data release, according to the CME FedWatch Tool.
Fed Chairman Jerome Powell said on Friday that recent US inflation data was in line with expectations and that the Fed’s goal for the interest rate this year remained unchanged. 

Technical analysis: USD/INR maintains a positive outlook in the longer term

Indian Rupee trades softer on the day. USD/INR maintains a bullish bias in the longer term since the pair rose above a nearly four-month-old descending trend channel last week. 

In the near term, USD/INR remains above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. The upward momentum is supported by the 14-day Relative Strength Index, which lies above the 50 midline. This indicates more room for further upside. 

A bullish break past a high of November 10, 2023, at 83.49 could spur a rally to an all-time high of 83.70 en route to 84.00 (psychological level). On the other hand, a break below the support level near a high of March 21 at 83.20 would sustain its bearish move to 83.00 (round mark, the 100-day EMA), followed by a low of March 14 at 82.80.

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 Swiss Franc.

 
USD
EUR
GBP
CAD
AUD
JPY
NZD
CHF

USD
 
0.05%
-0.03%
0.02%
-0.05%
0.09%
0.07%
0.23%

EUR
-0.05%
 
-0.06%
-0.03%
-0.10%
0.03%
0.02%
0.18%

GBP
0.01%
0.07%
 
0.04%
-0.07%
0.10%
0.05%
0.25%

CAD
-0.01%
0.05%
-0.02%
 
-0.09%
0.08%
0.04%
0.22%

AUD
0.08%
0.14%
0.07%
0.10%
 
0.17%
0.16%
0.31%

JPY
-0.09%
-0.04%
-0.11%
-0.06%
-0.14%
 
-0.03%
0.14%

NZD
-0.07%
-0.02%
-0.08%
-0.03%
-0.11%
0.04%
 
0.16%

CHF
-0.22%
-0.17%
-0.24%
-0.21%
-0.29%
-0.14%
-0.17%
 

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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