- Indian Rupee attracts some buyers on the softer USD.
- The IMF projected the Indian economy to remain strong at 6.5% in both 2024 and 2025.
- The FOMC Minutes from the January meeting will be due on Wednesday.
Indian Rupee (INR) gathers strength on Monday amid the decline of the US Dollar (USD). The positive economic outlook of India provides some support to the INR. The International Monetary Fund (IMF) said in its latest World Economic Outlook update that economic growth in India was projected to remain strong at 6.5% in both 2024 and 2025.
While Japan has unexpectedly slipped into a recession, India still shines as a ‘bright spot’ on the global map. The IMF forecasts that India will surpass both Japan and Germany in terms of economic output in 2026 and 2027, respectively. However, the geopolitical tension in the Middle East and economic headwinds might cap the upside of INR and drag the pair lower.
US markets are closed on Monday due to the President’s Day holiday. Market participants will keep an eye on the FOMC Minutes from the January meeting, due on Wednesday. The attention will turn to India’s S&P Global Services PMI and RBI MPC Meeting Minutes on Thursday.
Daily Digest Market Movers: Indian Rupee remains strong despite geopolitical tensions and multiple headwinds
- India’s goods trade deficit narrowed by nearly 12% in January compared to the previous month. The trade deficit dropped to $17.49 billion in January from $19.80 billion in December.
- Imports fell to $54.41 billion, from $58.25 billion in December. Exports decreased modestly in January to $36.92 billion from $38.45 billion in December. The slump in exports is mostly due to the geopolitical conflict in the Red Sea.
- The US Producer Price Index (PPI) for January increased by 0.3% MoM from a 0.1% decline in December. The PPI figure rose 0.9% in a year, beating market expectations.
- US Housing Starts fell -14.8% from 1.562M to 1.331M, while Building Permits slumped -1.5% from 1.8% in the previous reading.
- The Michigan Consumer Sentiment Index improved to 79.6 in February from January’s reading of 79.0, below the market consensus.
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Technical Analysis: Indian Rupee witnesses an upswing within the longer band
Indian Rupee trades firmer on the day. USD/INR has traded within a multi-month-old descending trend channel of 82.70–83.20 since December 8, 2023.
In the near term, USD/INR maintains a bearish bias as the pair is below the key 100-period Exponential Moving Average (EMA) on the daily chart. Furthermore, the 14-day Relative Strength Index (RSI) holds below the 50.0 midline, suggesting the path of least resistance level is to the downside.
The immediate resistance level for the pair is located near a high of February 14 at 83.10. The crucial upside barrier will emerge near the upper boundary of the descending trend channel at 83.20. Any follow-through buying above 83.20 will pave the way to a high of January 2 at 83.35, followed by the 84.00 psychological level.
On the downside, the initial support level for USD/INR is seen near a low of February 2 at 82.83. The additional downside filter to watch is the lower limit of the descending trend channel at 82.70, en route to a low of August 23 at 82.45.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.07% | -0.01% | 0.03% | 0.02% | -0.08% | -0.05% | 0.08% | |
| EUR | -0.07% | -0.09% | -0.04% | -0.07% | -0.15% | -0.12% | 0.01% | |
| GBP | 0.01% | 0.09% | 0.05% | 0.02% | -0.07% | -0.03% | 0.10% | |
| CAD | -0.03% | 0.04% | -0.05% | -0.03% | -0.12% | -0.08% | 0.05% | |
| AUD | 0.00% | 0.07% | -0.01% | 0.03% | -0.08% | -0.05% | 0.05% | |
| JPY | 0.09% | 0.13% | 0.08% | 0.12% | 0.06% | 0.03% | 0.16% | |
| NZD | 0.05% | 0.12% | 0.03% | 0.08% | 0.05% | -0.04% | 0.13% | |
| CHF | -0.08% | -0.01% | -0.09% | -0.03% | -0.08% | -0.17% | -0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
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