The Indian Rupee has shown signs of strengthening against the weaker US dollar on Tuesday. This could be attributed to India’s inflows that might lift the INR. However, the upside might be limited due to the weakness in major Asian peers and higher oil prices. Traders are keeping an eye on the US Chicago Fed National Activity Index, Consumer Confidence, and the upcoming speech from Fed officials Cook and Bowman. On a positive note, S&P Global Ratings have retained India’s growth forecast at 6.8% for FY25, highlighting high interest rates and increased government spending as factors boosting demand in non-agricultural sectors. This could potentially lead India to become a $4 trillion economy by 2025, surpassing Japan to become the world’s fourth-largest economy.
San Francisco Fed President Mary Daly’s comments on the Fed’s commitment to restoring price stability without causing economic disruptions reflect a cautious approach towards monetary policy. The Fed is still working towards addressing inflation concerns, emphasizing the need for further measures. The US’ Personal Consumption Expenditures (PCE) Price Index is expected to show a 2.6% rise on a yearly basis in May. This data will be crucial in understanding the inflationary pressures faced by the US economy. Market expectations have priced in a 66% probability of a Fed rate cut in September, indicating a cautious sentiment towards future monetary policy decisions.
Technical Analysis of USD/INR Pair
Looking at technical indicators, the USD/INR pair maintains a constructive outlook on the daily chart, supported by the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) suggests a potential consolidation phase in the near term. A move towards the all-time high of 83.75 could signal further upside towards the psychological level of 84.00. Beyond that, a bullish momentum could push the pair towards 84.50. Conversely, a decline may find support around the 83.30-83.35 region, followed by a downside barrier at 83.00.
The Indian Rupee is highly sensitive to external factors such as the price of crude oil, the value of the US dollar, and the level of foreign investment. The Reserve Bank of India (RBI) plays a significant role in maintaining exchange rate stability by intervening in the forex markets. Interest rates set by the RBI also influence the Rupee’s strength, as higher rates attract foreign investment. Macroeconomic factors like inflation, GDP growth rate, balance of trade, and foreign investment inflows all play a crucial role in determining the Rupee’s value. A robust growth rate, favorable balance of trade, higher interest rates, and increased foreign investment inflows can strengthen the Rupee. Conversely, higher inflation rates and negative trade balances can dilute the Rupee’s value.
The Indian Rupee’s trading scenario is influenced by a complex interplay of domestic and global economic factors. While recent trends point towards a favorable outlook for the Rupee, caution is advised due to the uncertainties surrounding inflation and monetary policy decisions. Traders and investors need to closely monitor key economic indicators and market developments to make informed decisions in the dynamic currency market.