- Indian rupee weakens in Wednesday’s Asian session.
- The feeling of risk aversion due to the increase in tensions between Israel and Iran weighed on the INR.
- The decision on the Fed interest rate will be the center of attention later on Wednesday.
Indian rupee (INR) slides towards the weakest level in more than two months on Wednesday. The Indian currency is still under sale, falling next to most of its Asian peers as crude oil prices shot at the increase in geopolitical tensions in the Middle East. It is worth noting that India is the third largest oil consumer in the world, and the highest prices of crude tend to have a negative impact on the value of the INR.
The decision on the interest rate of the Federal Reserve (FED) will be the culminating point later on Wednesday. The Fed is expected to maintain the policy rates without changes in the range of 4.25% -4.50% at its June meeting. Investors will closely follow their projections for the policy rates and the comments of President Jerome Powell. Any moderate comments from Fed officials could drag the US dollar (USD) down and help limit local currency losses.
Indian rupee remains weak amid growing geopolitical tensions
- “Geopolitical uncertainties and the sale of Indian shares and bonds by foreign investors have added pressure on the rupee. We will not see any appreciation until oil prices cool,” said Anindya Banerjee, head of research, FX and interest rates, Kotak Securities.
- According to a Financial JM report, four companies, including the Swiggy food delivery giant and the Waaree Energy solar module producer, could be included in the MSCI indexes in the next August review. Potential inclusions could trigger tickets of around 850 million dollars of passive funds that monitor the MSCI indices, said JM Financial.
- The president of the USA, Donald Trump, said he wants a permanent purpose to Iran’s route to nuclear weapons. In addition, Trump published on his social media platform late Tuesday, asking for the “unconditional surrender” of Iran.
- Israel is prepared to intensify its attacks against Tehran, while the United States (USA) is considering expanding its role in the middle of the growing tensions between Israel and Iran.
- Retail sales in the US fell 0.9% in May, compared to the 0.1% decrease (reviewed from +0.1%) registered in April, the US Census Office reported on Tuesday. This reading was below the market consensus of -0.7%.
- It is anticipated that the Fed maintains the interest rate without changes in the June meeting. The operators now see a possibility of almost 80% of a Fed feat cut in September, followed by another in October, according to Reuters.
USD/INR maintains a long -term bullish tone
Indian rupee is stronger in the day. The USD/INR pair maintains a constructive perspective, with the price remaining above the average exponential (EMA) mobile key of 100 days in the daily temporal framework. In addition, the 14 -day relative force (RSI) index is above the midline about 61.70, suggesting that bullish vibrations remain at the short term.
The first upward barrier for the USD/INR appears at 86.71, the maximum of April 9. A sustained trade above this level could pave the way to 87.38, the maximum of March 11. Further north, the next obstacle to observe is 87.53, the maximum of February 28.
In the bearish event, the first support level is found at 85.60, the 100 -day EMA. A rupture below the mentioned level could allow the downward trend to resume around 85.30, the minimum of June 2. The additional filter to be observed is 85.04, the minimum of May 27.
India Faqs Rupia
Indian rupee (INR) is one of the most sensitive currencies to external factors. The price of crude oil (the country depends largely on imported oil), the value of the US dollar (most of the trade is carried out in US dollars) and the level of foreign investment are all influential factors. The direct intervention of the Bank of the Reserve of India (RBI) in the currency markets to keep the exchange rate stable, as well as the level of the interest rates set by the RBI, are other important factors that influence the rupee.
The Bank of the Reserve of India (RBI) actively intervenes in the currency markets to maintain a stable exchange rate and help facilitate trade. In addition, the RBI tries to maintain the inflation rate in its 4% target adjusting interest rates. Higher interest rates often strengthen rupee. This is due to the role of the “Carry Trade”, in which investors borrow in countries with lower interest rates to place their money in countries that offer relatively higher interest rates and benefit from difference.
Macroeconomic factors that influence the value of rupee include inflation, interest rates, economic growth rate (GDP), trade balance and foreign investment tickets. A higher growth rate can lead to greater investment abroad, increasing the demand for rupee. A less negative trade balance will eventually lead to a stronger rupee. The highest interest rates, especially real types (less inflation interest rates) are also positive for rupee. A risk environment can generate higher direct and indirect foreign investment entries (FI and FII), which also benefit the rupee.
Higher inflation, particularly if it is comparatively higher than other countries, is generally negative for the currency, since it reflects a devaluation through excess supply. Inflation also increases the cost of exports, which leads to more rupees to buy foreign imports, which is negative for Indian rupee. At the same time, higher inflation usually leads to the Bank of the Reserve of India (RBI) to raise interest rates and this can be positive for rupee, due to the increase in demand for international investors. The opposite effect applies to lower inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
