The Indian Rupee faced a decline in Friday’s Asian session due to higher crude oil prices and ongoing local US Dollar demand. These factors weighed on the INR, while investors kept an eye on the US June employment data for potential market directions. Market players are anticipating figures such as Nonfarm Payrolls, Unemployment Rate, and Average Hourly Earnings, which could offer insights into the Federal Reserve’s policy rate trajectory. A weaker-than-expected outcome might lead to expectations of a Fed rate cut, adding selling pressure on the Greenback.
Analysts are optimistic about India’s stock market performance in the next decade following the country’s recent general election results. The statistics ministry raised India’s GDP growth forecast to 7.6% in its second revised estimate, up from 7.3% in the initial forecast. Fed officials have emphasized a data-dependent approach regarding interest rate cuts, with some policymakers mentioning the need for rate hikes if inflation rebounds. Traders are now pricing in a 70% probability of a 25 basis points Fed rate cut in September, up from the previous 58.2%.
The technical analysis of USD/INR shows the pair trading on a weaker note but with a bullish momentum on the daily timeframe. Despite hovering near the 100-day Exponential Moving Average (EMA), USD/INR has been consolidating within a familiar trading range in the short term. The 14-day Relative Strength Index (RSI) suggests further consolidation is likely. Potential targets for the pair include 83.65 and 83.75 on the upside, while support levels are seen at 83.35 and 83.00. The upcoming US Nonfarm Payrolls data is expected to shed more light on the pair’s future direction.
The US Dollar showed strength today against major currencies, with the Euro being the weakest. The percentage changes in USD against Euro, GBP, CAD, AUD, JPY, NZD, and CHF were displayed in a heat map format. The base currency selected from the left column and the quote currency from the top row showed the percentage change between the two currencies. The INR is highly sensitive to external factors such as crude oil prices, the value of the USD, foreign investments, and RBI interventions in the FX market to maintain stability.
The Reserve Bank of India intervenes in forex markets to stabilize the exchange rate and ensure smooth trade operations. Macroeconomic factors like inflation, interest rates, GDP growth rate, trade balance, and foreign investment inflows play a significant role in determining the value of the Rupee. While inflation and interest rates can impact the Rupee in different ways, a higher growth rate and improved trade balance can lead to a stronger Rupee. Overall, external and internal factors play a crucial role in influencing the Indian Rupee’s value in the global forex market.
