- The Indian Rupee gains strength in the Asian session on Monday.
- The weakening of the USD amid uncertainty surrounding the outcome of the US elections supports the INR.
- The HSBC India Manufacturing PMI will be released later on Monday.
The Indian Rupee (INR) rises on Monday as the US Dollar (USD) falls amid the likely liquidation of long positions ahead of the US presidential election. However, sustained foreign capital outflows from stocks domestic and rising crude oil prices could limit the rise of the INR.
The US presidential election and the Federal Reserve (Fed) interest rate decision will be in the spotlight this week and could trigger market volatility. The Federal Reserve is widely anticipated to cut rates by 25 basis points (bps) at its November meeting on Thursday. On the Indian agenda, the HSBC manufacturing Purchasing Managers’ Index (PMI) will be released on Monday.
Daily Market Summary: Indian Rupee Rebounds Ahead of Imminent US Presidential Elections
- According to a Reuters poll, the Indian rupee will trade in a narrow range around current levels against the dollar over the next year as the Reserve Bank of India (RBI) routinely taps into its foreign exchange reserves to manage stability. of the currency.
- “(Currency) intervention has been an ongoing issue and not just this year, it has continued post-COVID, so we would expect interventions in both directions to continue,” said Vivek Kumar, economist at QuantEco Research.
- US nonfarm payrolls (NFP) rose by 12,000 in October, following the increase of 223,000 (revised from 254,000) seen in September, the US Bureau of Labor Statistics (BLS) showed on Friday. figure was much weaker than market expectations of 113,000.
- The unemployment rate remained stable at 4.1% in October, in line with consensus.
- “A Trump victory is widely considered to be positive for the USD, although many feel this outcome has already been priced in,” said Chris Weston, analyst at brokerage Pepperstone.
Technical Analysis: Positive view of USD/INR remains in the long term
The Indian Rupee is trading weaker on the day. However, the bullish outlook for the USD/INR pair remains intact, with the price holding above the 100-day exponential moving average (EMA). The bullish momentum is reinforced with the 14-day Relative Strength Index (RSI), which is above the midline near 57.70.
The first upside barrier for USD/INR emerges at the upper boundary of the uptrend channel at 84.24. Extended gains above this level could attract enough buying demand up to 84.50, en route to the psychological level of 85.00.
On the downside, a decisive close below the lower boundary of the trend channel near 84.05 could pave the way towards 83.78, the 100-day EMA.
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. Furthermore, 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.
