Indian Rupee holds firm amid concerns over RBI swaps expiry, focus on US bond yields and oil prices

• The Indian Rupee remains firm, supported by possible aggressive intervention by the Reserve Bank of India (RBI).
• A rise in US Treasury yields and rise in crude oil prices could limit the rise of the Indian Rupee.
• Investors will focus on RBI currency swap expiry and US economic data.

The Indian Rupee (INR) posts modest gains on Monday. The strengthening of the Indian Rupee is reinforced by the possible aggressive intervention of the Reserve Bank of India (RBI) last week. However, the expectation that the Federal Reserve (Fed) will keep rates “higher for longer” lifts US Treasury yields near multi-year highs. However, a rise in oil prices could limit the rise of the Indian Rupee.

Traders will be watching a Reserve Bank of India swap deal worth $5 billion, which is scheduled to expire on Monday. The expiration of USD/INR swaps will remove $5 billion from the system, while injecting about Rs 400 billion. Additionally, this week traders will closely monitor the release of the US S&P Global PMI, the first reading of the third quarter Gross Domestic Product (GDP) and the underlying Personal Consumption Expenditure (PCE) data.

Daily Market Drivers Roundup: Indian Rupee Gains Momentum Amid Uncertainty

• The Monetary Policy Committee of the Reserve Bank of India (RBI) said it would continue to focus on keeping inflation at the target of 4%.
• Varma, a member of India’s Monetary Policy Committee, said the 1% real rate will push inflation towards the target.
• Net foreign direct investment (FDI) in India fell from $18.03 billion in April-August last year to $2.99 ​​billion this year, reflecting a slowdown in global activity and a rise in repatriation.
• Fed Chairman Jerome Powell and other officials have expressed a desire to keep rates unchanged unless inflation rises.
• The US budget deficit for September was $170 billion. The global budget deficit for 2023 was $1.695 trillion, up 23% from the previous year and higher than all pre-crisis deficits.
• RBI chief Shaktikanta Das stated that the central bank intervenes in the forex market, but only to prevent excessive volatility of the Indian Rupee.
• Chairman Das stated that the RBI will monitor the evolving inflation dynamics amid uncertainty over food inflation.
• The Indian Finance Minister will focus on the impact of current tensions in the Middle East on the supply chain.
• The Indian government is concerned about the settlement currency, the Yuan, as Indian refiners have used the Yuan to pay for some of the oil from Russian sellers.
• The Reserve Bank of India’s October bulletin suggested that growth is expected to gain momentum during the rest of the year.
• The Reserve Bank of India sold a net $3.86 billion in the foreign exchange spot market in August.
• The Indian Wholesale Price Index for September stood at -0.26% YoY, down from 0.52% in the previous reading, below the market estimate of 0.50%.

Technical Analysis: Indian Rupee remains above the psychological level of 83.00

The Indian Rupee starts the week on a positive note against the US Dollar (USD). The USD/INR pair is trading within a tight range of 83.15-83.30 and the key support level is seen at the psychological level of 83.00. A break below this level could lead to a drop to 82.82 (September 12 low), followed by 82.65 (Aug 4 low). To the upside, the first resistance level for USD/INR lies near the October 4 high at 83.30, en route to the all-time high around 83.45, followed by the psychological level at 84.00. Meanwhile, the pair remains above the 100-day and 200-day EMA on the daily chart, indicating that the upside looks favorable.