The Indian Rupee edges lower on Tuesday despite the weaker USD.
RBI is anticipated to maintain its policy in April as the Indian economy remains strong and inflation remains above its 4% target.
The Indian and US February CPI inflation data will be in the spotlight on Tuesday.
The Indian Rupee (INR) trades on a weaker note on Tuesday, despite the decline of the US dollar (USD). The softer Greenback and a decline in crude oil prices might boost the Indian Rupee in the near term. INR reached an over six-month intraday high of 82.65 on Monday, but the rally was limited by a possible invention from the Reserve Bank of India (RBI) to prevent a significant appreciation in the INR.
India’s headline retail inflation is expected to drop to 5.02% in February from 5.10% in January, extending it within the RBI’s tolerance range of 2-6% for the sixth consecutive month. However, economists expect the Indian central bank to maintain current monetary policy at its April meeting since the domestic economy remains strong and inflation continues to stay above its 4% target.
Looking ahead, investors will monitor India’s and US Consumer Price Index (CPI) inflation data for February, due on Tuesday. Later this week, India’s Wholesale Price Index (WPI) of Food, Fuel, and Inflation will be released on Wednesday, and the US Retail Sales will be published on Thursday.
Daily Digest Market Movers: Indian Rupee remains vulnerable to high inflation, geopolitical tensions
India’s foreign reserves increased by $6.55 billion to $625.626 billion in the week ended March 1, according to the RBI.
Indian Commerce and Industry Minister Piyush Goyal said many developed and developing countries have shown interest in trading in the Indian currency with India to cut transaction costs as the INR gains traction
The Indian economy will transition to an upper middle-income country by FY36, reaching the $15 trillion mark by FY47, according to India Ratings and Research (Ind-Ra).
Fed Chair Jerome Powell said the US economy is healthy, and policymakers are not far from having enough confidence in inflation’s downward trajectory to begin cutting rates.
Futures markets have priced in about a 70% chance the Fed will start cutting interest rates by mid-June and expect a full percentage point of rate cuts by the end of the year, according to the CME FedWatch Tools.
The headline CPI figure is expected to remain steady at 3.1% YoY in February, while the Core CPI figure is estimated to ease to 3.7% YoY in February.
Most recent article: Sensex: Higher Gift Nifty futures point to a positive open, as focus stays on India/ US CPI data
Technical Analysis: Indian Rupee remains confined within a longer-term range of 82.60–83.15
Indian Rupee trades softer on the day. USD/INR remains stuck within a multi-month-old descending trend channel since December 8, 2023 around 82.60–83.15.
In the near term, USD/INR maintains the negative outlook unchanged as the pair is below the 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI), which lies below the 50.0 midlines, is contributing to bolstering the downward momentum.
The critical support level is located at the lower limit of the descending trend channel at 82.60. A break below this level could drag the pair lower to a low of August 23 at 82.45 and then revisit a low of June 1 at 82.25.
On the other hand, the first upside barrier will emerge at the 83.00 mark, portraying the confluence of the 100-day EMA and a psychological round mark. The additional upside filter to watch is the upper boundary of the descending trend channel at 83.15. A bullish breakout above the mentioned level might attract bulls and the pair might recover to a high of January 2 at 83.35, followed by an 84.00 round figure.
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
-0.76%
-1.02%
-0.75%
-1.67%
-2.05%
-1.25%
-0.95%
EUR
0.75%
-0.26%
0.01%
-0.93%
-1.28%
-0.51%
-0.17%
GBP
1.02%
0.27%
0.28%
-0.67%
-1.00%
-0.22%
0.10%
CAD
0.75%
-0.01%
-0.29%
-0.97%
-1.29%
-0.52%
-0.18%
AUD
1.65%
0.94%
0.66%
0.95%
-0.33%
0.43%
0.75%
JPY
2.02%
1.29%
1.00%
1.29%
0.35%
0.80%
1.11%
NZD
1.23%
0.50%
0.21%
0.50%
-0.43%
-0.80%
0.33%
CHF
0.93%
0.17%
-0.09%
0.19%
-0.73%
-1.11%
-0.31%
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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