- Indian rupee falls to a new historical minimum in the Asian session on Monday.
- The strengthening of the USD and persistent outputs weigh on the INR.
- Investors expect the report of the EE.UU manufacturing PMI of January, which will be published on Monday.
Indian rupee (INR) collapses on Monday. Trump’s announcement on the imposition of tariffs on the main commercial partners, including China, Canada and Mexico, exerts some sales pressure on the local currency. In addition, the American dollar (USD), the persistent existent exits of foreign institutional investors (FIIS) and the feeling of risk aversion contribute to the fall of the INR.
On the other hand, the intervention in the foreign exchange market of the Bank of the Reserve of India (RBI) should defend the rupee and limit its fall. Later on Monday, investors will be attentive to the USM manufacturing PMI of January.
Indian rupee is still under sale in the midst of fears of a commercial war
- India currency reserves fell to 629,557 million dollars as of January 30, 2024, from 701,176 million dollars on October 4, 2024.
- The Minister of Finance, Nirmala Sitharaman, said on Friday’s budget that the Indian government will point to a lower fiscal deficit of 4.4% of the gross domestic product (GDP) for fiscal year 2025-26, compared to 4.8% reviewed for the Current year.
- The Government increased gross indebtedness to 14.82 billion rupees (171,26 billion dollars) of the market to finance the deficit, compared to 14.01 billion rupees in the current year.
- The White House said on Saturday that a 25% tax on Canadian and Mexican imports, as well as an additional 10% tax on Chinese products, would go into force on Tuesday.
- Canada, Mexico and China have promised to respond to new tariffs on their exports to the US announced by Trump.
- “The announcement of tariffs is necessary to hold China, Mexico and Canada responsible for their promises to stop the avalanche of poisonous drugs to the United States,” said the White House in a statement on X on Saturday.
USD/INR seeks a new historical maximum
Indian rupee quotes on a weaker note in the day. The USD/INR pair maintains a constructive perspective in the daily chart, since the price is above the exponential (EMA) mobile average of 100 days. The bullish impulse is supported by the 14 -day relative force (RSI) index, which is above the midline about 63.20, which suggests that the support will probably remain instead of breaking.
The 87.00 psychological brand acts as a first upward barrier for the pair. Sustained profits above this level could see a race around 87.50.
On the other hand, the initial support level emerges at 86.51, the minimum of January 31. A decisive breakdown below this level could expose 86.31, the minimum of January 28.
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.
