- The Indian rupee gains ground in Thursday’s Asian session.
- Continued capital inflows from India and falling oil prices are supporting the value of the Indian rupee.
- On Thursday, the most critical topic will be the US Consumer Price Inflation (CPI) index for June.
The Indian Rupee (INR) strengthened on Thursday amid a weaker US Dollar (USD). Further, sustained foreign fund inflows into Indian markets and falling crude oil prices are supporting the INR. The currency pair’s gains remain constrained amid potential interest rate cuts by the US Federal Reserve (Fed), even as Fed Chairman Jerome Powell said the job market is more balanced and acknowledged progress in cooling inflation without committing to rate cuts.
However, renewed demand for the Greenback from importers due to high oil price pressure could undermine the local currency as India is the world’s third-largest consumer of crude oil after the United States and China. Later on Thursday, investors will be closely watching the release of the US Consumer Price Index (CPI) inflation data for June. Further progress on inflation could lead to key changes in their policy statement, paving the way for a rate cut in September.
Daily Market Update: Indian Rupee Recovers on Fed Inflows from India and Lower Oil Prices
- The Indian rupee is expected to trade on a slightly bearish note due to weakness in the domestic market and positive tone in the US dollar, said Anuj Choudhary, research analyst at Sharekhan at BNP Paribas.
- Federal Reserve Chairman Jerome Powell responded to questions from the House Financial Services Committee on Wednesday by saying the Federal Reserve will make interest rate decisions based on data, incoming data, changing prospects and the balance of risks, rather than political factors.
- Powell added that it would not be appropriate to cut interest rates until there was greater certainty that inflation would head toward the Fed’s 2% target.
- US Federal Reserve Chair Lisa Cook said on Thursday that US inflation should continue to decline without a significant augment in the unemployment rate, Reuters reported.
- According to the CME FedWatch Tool, the probability that the Fed would leave interest rates unchanged in September after this event was almost 25%.
- The US CPI is forecast to rise by 3.1% year-on-year in June, while core inflation is expected to remain at 3.4% year-on-year.
Technical Analysis: USD/INR Extends Consolidation in the Short Term
The Indian Rupee is trading on a positive note today. The USD/INR pair is maintaining its uptrend on the daily chart, holding above the key 100-day exponential moving average (EMA).
The near-term trend continues to be one of consolidation as the pair has been trading within a familiar range since March 21. The neutral momentum is also supported by the 14-day Relative Strength Index (RSI), which is hovering around the 50 midline.
A hold above the upper end of the trading range at 83.65 will pave the way for an all-time high at 83.75. Further north, the next obstacle is the psychological barrier at 84.00.
On the other hand, a decisive break below the 100-day EMA at 83.36 could attract enough bearish demand to the round 83.00 level. An additional bearish filter to watch is 82.82, the low from January 12.
The price of the US dollar this week
The table below shows the percentage change in the US dollar (USD) against the major currencies traded this week. The US dollar was the weakest against the British pound.
| USD | EUR | GBP | BOOR | AUD | JPY | NZD | CHF | |
| USD | -0.11% | -0.42% | -0.16% | -0.15% | 0.64% | 0.74% | 0.42% | |
| EUR | 0.11% | -0.31% | -0.05% | -0.05% | 0.74% | 0.86% | 0.54% | |
| GBP | 0.41% | 0.31% | 0.26% | 0.25% | 1.03% | 1.15% | 0.84% | |
| BOOR | 0.16% | 0.05% | -0.26% | -0.02% | 0.77% | 0.90% | 0.58% | |
| AUD | 0.16% | 0.07% | -0.25% | 0.02% | 0.79% | 0.91% | 0.60% | |
| JPY | -0.64% | -0.75% | -1.07% | -0.80% | -0.77% | 0.13% | -0.20% | |
| NZD | -0.74% | -0.86% | -1.18% | -0.92% | -0.91% | -0.12% | -0.31% | |
| CHF | -0.42% | -0.54% | -0.86% | -0.59% | -0.61% | 0.20% | 0.32% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select 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).
