- Indian rupee stabilizes in Tuesday’s Asian session.
- A weaker US dollar and a stronger Chinese yuan could support the INR, but bets for a RBI feat cut could limit their rise.
- The US Conference Board Conference Board report will be published later on Tuesday.
The Indian rupee (INR) remains stable on Tuesday after reaching a maximum of two weeks in the previous session. A broader gain in Asian currencies due to a weak US dollar (USD) could provide some support to the Indian currency. In addition, a fall in crude oil prices could contribute to the increase of the INR. It is worth noting that India is the third largest oil consumer in the world, and the lowest prices of crude oil tend to have a positive impact on the value of the INR.
However, the expectations of lower interest rates by the Indian Reserve Bank (RBI) could weigh on the local currency. The operators prepare for the consumer confidence report of the US Board Conference Board, which will be published later on Tuesday. The requests for lasting goods and the manufacturing index of the Fed of Dallas will also be published. The minutes of the Federal Open Market Committee (FOMC) will be the culminating point later on Wednesday.
Indian rupee remains stable amid the weakening of the US dollar
- “It is a very positive environment for emerging markets, and I see no reason why that stops in the short term,” said Brad Bechtel, global currency head in Jefferies. Bechtel emphasized that the US dollar (USD) could face more pronounced losses if China allows Yuan to begin to move substantially upwards.
- The monetary policy committee (MPC) of the RBI will probably cut the repo rate at 25 basic points (PB) at the June meeting, according to the MoneyControl survey to economists and busts of Banks Treasury.
- Niti Aayog’s Executive Director (CEO), BVR Subrahmanyam, said India has surpassed Japan to become the fourth largest economy in the world, citing data from the International Monetary Fund (IMF).
- According to the CME Fedwatch tool, the possibilities of an interest rate cut by the Federal Reserve (FED) at the June meeting are only 5.6%.
USD/INR maintains long -term negative bias
Indian rupee quotes in a flat tone in the day. The bass perspective of the USD/INR torque is maintained, since the price is below the 100 -day exponential (EMA) mobile average in the daily chart. In addition, the downward impulse is reinforced by the 14 -day relative force (RSI) index, which is below the midline about 45.00. This suggests that more falls seem favorable in the short term.
The first support level for USD/INR is located at 84.78, the minimum of May 26. Any additional sale below this level could trigger a drop to 84.61, the minimum of May 12. The additional filter to the decline is 84.05, the lower limit of the trend channel.
In the upward case, the 100 -day EMA at 85.55 acts as an immediate level of resistance for the torque. A sustained trade above the mentioned level could raise the USD/INR to 85.75, the upper limit of the trend channel. Further north, the following obstacle is seen at 85.10, the maximum of May 22.
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.
