- Indian Rupee holds mild gains on a decline in US yields, US Dollar.
- The Federal Open Market Committee (FOMC) decided to hold the rate steady at its November meeting.
- The US Nonfarm Payrolls (NFP) will be closely watched later this week.
Indian Rupee posts modest gains on Thursday on lower US Treasury bond yields and the correction of the US Dollar (USD). The Federal Open Market Committee (FOMC) kept the federal funds rate unchanged at the 5.25-5.50% range at its November meeting on Wednesday, as widely expected. The Greenback edges lower as the markets anticipate that the US rate hike cycle is already over, despite Fed Chair Jerome Powell opening the door for another rate hike.
Nonetheless, the Indian Rupee remains sensitive to risk sentiment and global factors. The escalating tension in the Middle East and higher crude oil prices might contribute to the risk-off environment and cap the upside of the Indian Rupee. Investors will monitor the US weekly Initial Jobless Claims for the week ending October 27 on Thursday. The US Nonfarm Payrolls (NFP) will be in the spotlight on Friday.
Daily Digest Market Movers: Indian Rupee trades strongly amid the multiple challenges
- Indian government bond rates dropped in early trading on Thursday, following a dip in US yields.
- Traders’ attention will turn to debt sales, as India plans to sell its longest-duration bond on Friday, which is expected to see strong demand
- The Reserve Bank of India (RBI) has appointed Mr Manoranjan Mishra as Executive Director.
- RBI announced the debut of the ‘Inflation Expectations Survey of Households’ and the ‘Consumer Confidence Survey,’ which would offer key inputs for the bi-monthly monetary policy.
- RBI Governor Shaktikanta Das said GDP growth for the second quarter of FY24 would surpass estimations.
- Geopolitical risks are the biggest challenge for India, but RBI Governor Das said India is better placed compared to other countries to deal with any potentially risky situation.
- Foreign investors sold $2.74 billion in Indian equities in October, marking the largest monthly sell-off since January 2023.
- The Federal Open Market Committee (FOMC) decided to hold the interest rate unchanged at its November meeting on Wednesday, as widely expected.
- The probability that the Fed would not raise another rate rose during the press conference.
- The 10-year US Treasury yield was close to 4.70%, as the odds of a rate hike in December rate fell to 15%.
- The US Private Sector Payroll rose by 113K from 89K in September, below the 150k rise expected.
- US JOLTS Jobs Opening climbed to 9.553M, better than the estimation of 9.25M.
- The US ISM Manufacturing PMI dropped to 46.7 in October from the previous reading of 49.0, the lowest reading since July 2023.
Technical Analysis: Indian Rupee rebound, upside potential seems limited
The Indian Rupee stages a modest recovery on the day. The USD/INR pair has traded within a familiar range of 83.00–83.35 since September. In the meantime, USD/INR keeps a bullish stance as the pair holds above the key 100- and 200-day Exponential Moving Averages (EMA) on the daily chart.
That being said, the key support level will emerge at the confluence of a low from October 24 and a round level marked at 83.00. A breach below 83.00 will see a drop to a low of September 12 at 82.82. Further south, the next contention level to watch is a low of August 4 at 82.65.
On the upside, the upper boundary of the trading range at 83.35 acts as an immediate upside barrier for the pair. Any decisive follow-through buying above the latter will pave the way to the year-to-date (YTD) highs of 83.45. The additional upside filter is located near a psychological round figure at 84.00.
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 Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.28% | -0.64% | 0.24% | -2.06% | 0.23% | -1.58% | 0.80% | |
| EUR | 0.29% | -0.36% | 0.52% | -1.77% | 0.50% | -1.29% | 1.11% | |
| GBP | 0.64% | 0.36% | 0.89% | -1.40% | 0.87% | -0.91% | 1.46% | |
| CAD | -0.23% | -0.52% | -0.89% | -2.30% | -0.01% | -1.82% | 0.58% | |
| AUD | 2.02% | 1.74% | 1.39% | 2.25% | 2.24% | 0.47% | 2.84% | |
| JPY | -0.23% | -0.49% | -0.88% | 0.01% | -2.31% | -1.83% | 0.58% | |
| NZD | 1.55% | 1.27% | 0.92% | 1.79% | -0.49% | 1.78% | 2.36% | |
| CHF | -0.83% | -1.11% | -1.47% | -0.58% | -2.90% | -0.60% | -2.42% |
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).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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