- Indian Rupee trades weaker amid the firmer USD.
- Goldman Sachs predicts a positive trajectory for the Indian economy in 2024.
- Investors await the US ADP Employment Change and Initial weekly Jobless Claims, due later on Thursday.
Indian Rupee (INR) continues to trade on a softer note on Thursday amid the stronger US Dollar (USD) broadly. Goldman Sachs Chief India Economist Santanu Sengupta said that India’s positive perspective is fuelled by expectations of substantial foreign capital inflows, especially as the Reserve Bank of India (RBI) continues to accumulate inflows and build currency reserves at every possible opportunity.
In 2023, the Indian economy expanded at 6.5%, outperforming most major countries. However, given the global economic picture, the road ahead may be challenging. Furthermore, the Indian election in mid-2024 will be closely watched as it could impact investors’ sentiment.
Later on Thursday, the US ADP Employment Change and Initial weekly Jobless Claims will be released. The spotlight this week will be the US employment data, including the highly anticipated US Nonfarm Payrolls (NFP). December’s NFP figure is expected to show an increase of 170K, compared to 199K in November.
Daily Digest Market Movers: Indian Rupee maintains a bullish path amid the multiple challenges and uncertainties
- The Indian S&P Global Manufacturing PMI for December arrived at 54.0 versus 56.0 prior, below the market consensus of 55.9.
- Economists at Citi forecast a modest 50 basis points (bps) drop in the GDP growth rate for India in the fiscal year 2025.
- US ISM Manufacturing PMI for December rose to 47.4 from 46.7 in the previous reading, above the market consensus of 47.1.
- The minutes of the FOMC meeting in December stated that participants believe the policy rate to be at or near its peak for this tightening cycle, but the actual policy path would depend on how the economy evolves.
- Richmond Fed President Thomas Barkin said that interest rate hikes remain on the table despite progress in inflation control.
- US S&P Global Manufacturing PMI eased to 47.9 in December from 48.2 in November, weaker than expectations.
Technical Analysis: Indian Rupee sticks to the longer-term range since September
Indian Rupee extends its downside on the day. The USD/INR pair remains stuck in a multi-month-old trading range of 82.80–83.40. According to the daily chart, the further upside looks favorable as the pair holds above the key 100-period Exponential Moving Average (EMA). Furthermore, the 14-day Relative Strength Index (RSI) is above the 50.0 midpoint, supporting the upward momentum.
The first resistance level for USD/INR will emerge at the upper boundary of the trading range at 83.40. A decisive break above 83.40 will open the door to a 2023 high of 83.47, then the psychological figure at 84.00. On the other hand, 83.00 acts as an initial support level for the pair. The additional downside filter to watch is the confluence of the lower limit of the trading range and a low of September 12 at 82.80, and finally near a low of August 11 at 82.60.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.19% | 0.48% | 0.68% | 1.10% | 1.82% | 0.87% | 1.00% | |
| EUR | -1.03% | -0.52% | -0.35% | 0.07% | 0.66% | -0.17% | -0.08% | |
| GBP | -0.49% | 0.54% | 0.21% | 0.61% | 1.41% | 0.38% | 0.44% | |
| CAD | -0.68% | 0.34% | -0.01% | 0.41% | 1.14% | 0.17% | 0.27% | |
| AUD | -1.10% | -0.07% | -0.61% | -0.44% | 0.55% | -0.23% | -0.13% | |
| JPY | -1.84% | -0.61% | -1.29% | -0.95% | -0.56% | -0.80% | -0.89% | |
| NZD | -0.87% | 0.17% | -0.38% | -0.19% | 0.24% | 0.77% | 0.07% | |
| CHF | -0.95% | 0.10% | -0.44% | -0.24% | 0.18% | 0.86% | -0.06% |
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).
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
Read the full article here