- The USD/INR rises to about 86.00 since the RBI has cut its repurchase rate at 50 basic points to 5.5%, compared to the expectations of a reduction of 25 basic points in the interest rate.
- The RBI has changed its posture of accommodation to neutral.
- Investors expect US NFP data for May.
The Indian rupee (INR) weakens against the US dollar (USD) and falls to about 86.00 during Friday’s Asian negotiation hours. The USD/INR pair is strengthened since the Bank of the Reserve of India (RBI) has unexpectedly cut its repurchase rate in 50 basic points (BPS) to 5.5%.
Economists had anticipated that the RBI would cut its repurchase rate in 25 BPS for the third consecutive time. An unexpected rate cut is expected to expand policy divergence with other central banks, which could keep the INR at a disadvantage in the short short term.
The governor of the RBI, Sanjay Malhotra, has declared that a significant rate cut to boost economic growth was needed. “It was necessary to advance feat cuts to support growth,” said Malhotra. The RBI has reviewed the inflation guide for fiscal year 26 to 3.7% from the 4.0% projected above, but has expressed concerns that the last stage of inflation seems to be more persistent. “The last inflation mile is a bit more prolonged,” said Malhotra.
Meanwhile, the RBI has changed its posture of “accommodation” to “neutral” policy, which suggests that the next monetary policy decision could be on any of the sides.
Daily summary of market movements: Indian rupee falls through the significant rate of RBI
- The upward movement in the USD/INR is also driven by the US dollar, which is negotiated calmly before the US non -agricultural payroll data (NFP) for May, which will be published at 12:30 GMT. The American dollar index (DXY), which tracks the value of the dollar against six main currencies, clings to the recovery movement at the end of Thursday around 98.80.
- Investors will pay special attention to official US employment data as they will influence market expectations on the monetary policy of the Federal Reserve (FED).
- The probability that the FED reduces interest rates at the July policy meeting has increased slightly after the disappointing change of employment of ADP in the US and an unexpected contraction in the PMI of Services for May, published on Wednesday. According to the CME Fedwatch tool, the probabilities that the FED cut its interest rates in July have increased to 32.8% from 22.5% seen a week ago.
- Contrary to a slight increase in dovish bets on the Fed, officials have indicated that interest rates should remain at their current levels for a longer time, since tariffs have caused up risks for inflation for an uncertain period. Kansas City Fed president Jeff Schmid said on Thursday that tariffs will probably “increase prices by an unknown amount in the coming months,” Reuters said. Schmid added that the “probable effect will not be completely evident for some time.” His comments suggested that he was a little worried about economic growth and employment. “The scope of the impact of growth and employment tariffs is not clear, but I am optimistic that economic activity can be maintained,” said Schmid.
- The US NFP report is expected to show that the economy added 130K new workers, slightly below 171K hired in April. It is expected that the unemployment rate will remain stable at 4.2%. Meanwhile, it is estimated that the average hourly profits, a key measure of salary growth, have moderately grown 3.7% year -on -year, compared to the previous reading of 3.8%. In the month, the salary growth measure is expected to increase 0.3%, faster than 0.2% in April.
- On Thursday afternoon, the US dollar recovered sharply after the US president, Trump, expressed optimism in a publication in Truth.Social that there will be harmony in commercial negotiations between Washington and Beijing. “The call lasted about an hour and a half and resulted in a very positive conclusion for both countries. “There should no longer be questions about the complexity of rare earth products,” Trump wrote.
Technical Analysis: The USD/INR advances about 86.00
The Indian rupee falls to about 86.00 against the US dollar on Friday. The short -term trend of the torque is already bullish since it remains above the 20 -day exponential (EMA) mobile average, which is negotiated around 85.47.
The 14 -day relative force index (RSI) ranges around 60.00. A new bullish impulse will take action if the RSI breaks above that level.
Looking up, the torque could review a maximum of more than 11 weeks around 86.70 after breaking above the maximum of May 22, 86.10. Downward, the minimum of June 3, 85.30 is a key support level for the main torque. A downward break below this level could expose it to the minimum of May 26, 84.78.
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.
