The Indian Rupee is trading in negative territory in Tuesday’s Asian session due to higher US bond yields and further gains in crude oil prices. The local currency is also facing selling pressure from renewed US Dollar demand. As India is the world’s third-largest oil consumer, the rise in crude oil prices is a concern for the INR. Despite these factors, the optimism in the Indian economic outlook and portfolio inflows might provide support to the local currency. Investors are keeping a close eye on Federal Reserve Chairman Jerome Powell’s speech for fresh impetus.
In recent data reports, India’s HSBC Manufacturing PMI for June came in at 58.3, weaker than the expected 58.5. The growth was supported by a record-high rate of job creation and buoyant demand conditions. Foreign investors bought 16.54 billion rupees in Indian bonds under the Fully Accessible Route, lower than market expectations. On the other hand, the US Manufacturing PMI for June declined to 48.5, weaker than the estimated 49.1. Financial markets are now pricing in a 59.5% chance of a 25 basis points Fed rate cut in September.
From a technical analysis perspective, the USD/INR pair might face consolidation or downside in the near term. The pair remains within a familiar trading range on the daily chart with a bullish trend above the key 100-day EMA. However, further consolidation or downside cannot be ruled out, with the RSI holding in bearish territory below the 50-midline. Any follow-through selling below the 100-day EMA might push the pair lower towards the 83.00 round figure.
The Reserve Bank of India (RBI) plays a key role in influencing the value of the Indian Rupee. The RBI actively intervenes in forex markets to maintain a stable exchange rate and adjusts interest rates to control inflation. Factors such as inflation, interest rates, GDP growth rate, balance of trade, and foreign investment inflows also impact the value of the Rupee. Higher inflation can have a negative impact on the currency, while higher interest rates usually strengthen the Rupee. Macroeconomic factors like economic growth and inflows from foreign investment play a significant role in determining the strength of the INR.
Overall, the Indian Rupee is facing some challenges due to higher US bond yields and crude oil prices. However, the optimism in the Indian economic outlook and portfolio inflows could provide some support to the currency. Investors will be closely monitoring Jerome Powell’s speech and India’s HSBC Services PMI for further guidance on the direction of the USD/INR pair. As the situation continues to evolve, it will be essential to keep an eye on key economic indicators and global developments that could impact the Indian Rupee.
