- The Indian Rupee weakens in the Asian session on Thursday.
- Continuous selling of domestic stocks by foreign investors weighs on the INR.
- US retail sales for September will be the highlight on Thursday.
The Indian Rupee (INR) is trading with slight losses against the strength of the US Dollar (USD) on Thursday. Significant capital outflows from Indian stocks and demand for USD from foreign banks and importers put some selling pressure on the local currency.
However, falling crude oil prices amid easing fears over supply disruption in the Middle East could support the INR as India is the world’s third-largest oil consumer. Furthermore, routine interventions in the foreign exchange market by the Reserve Bank of India (RBI) could limit the decline of the Indian Rupee.
Traders will be keeping an eye on US retail sales data for September, due later on Thursday. US weekly initial jobless claims, industrial production and the Philadelphia Fed manufacturing survey will also be released.
Daily Market Summary: Indian Rupee Remains Weak Amid Foreign Fund Outflows
- India’s trade deficit stood at $20.78 billion in September, up from $29.65 billion in August, according to data released by the commerce ministry on Wednesday.
- India’s exports rose marginally to 34.58 billion in September from 34.41 billion in the year-ago period. Meanwhile, imports decreased to 55.36 billion in September from 64.36 billion previously.
- Foreign funds withdrew more than $7 billion from Indian stocks in the month to Oct. 14, the most in more than four years, according to Bloomberg.
- US retail sales are estimated to rise 0.3% in September from 0.1% in the previous reading.
- According to the CME’s FedWatch tool, traders have priced in a nearly 94% probability of a 25 basis point (bp) Fed rate cut in November.
Technical Analysis: USD/INR constructive outlook remains intact
The Indian Rupee is trading in negative territory on the day. Technically, the USD/INR pair maintains the bullish vibe as the price remains above the ascending trend line and the key 100-day EMA on the daily chart. The bullish momentum is supported by the 14-day Relative Strength Index (RSI), which is above the midline near 58.80, suggesting that the uptrend is more likely to gain traction than reverse.
Sustained trading above the all-time high of 84.15 could expose the pair to a possible move towards 84.50. Further north, the next upside barrier to watch is the psychological level of 85.00.
Bearish candles below the ascending trend line could lead to 83.90, the October 10 low. A break of this level could pave the way towards 83.70, the 100-day EMA. The next level of containment is seen at 83.00, which represents the round mark and the May 24 low.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the currencies most sensitive to external factors. The price of crude oil (the country relies heavily on imported oil), the value of the US Dollar (most trade is done in US dollars), and the level of foreign investment are all influential factors. The direct intervention of the Reserve Bank of India (RBI) in the foreign exchange markets to keep the exchange rate stable as well as the level of interest rates set by the RBI are other important factors influencing the Rupee. .
The Reserve Bank of India (RBI) actively intervenes in foreign exchange markets to maintain a stable exchange rate and help facilitate trade. Additionally, the RBI tries to keep the inflation rate at its target of 4% by adjusting interest rates. Higher interest rates tend to strengthen the Rupee. This is due to the role of the “carry trade”, in which investors borrow in countries with lower interest rates to park their money in countries that offer relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, economic growth rate (GDP), trade balance and foreign investment inflows. A higher growth rate can lead to more investment abroad, increasing demand for the Rupee. A less negative trade balance will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates minus inflation) are also positive for the Rupee. A risk environment can lead to higher inflows of foreign direct and indirect investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly if it is comparatively higher than other countries, is generally negative for the currency as it reflects a devaluation through excess supply. Inflation also increases the cost of exports, leading to more rupees being sold to buy foreign imports, which is negative for the Indian Rupee. At the same time, higher inflation usually leads the Reserve Bank of India (RBI) to raise interest rates and this can be positive for the Rupee, due to increased demand from 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.
