- Indian Rupee trades on a negative note on Friday amid a stronger US Dollar.
- India’s Wholesale Price Index-based inflation dropped to a four-month low, weaker than expected.
- Investors will focus on the Indian Trade Balance data and US preliminary Michigan Consumer Sentiment, due on Friday.
Indian Rupee (INR) loses momentum on Friday. The uptick in the pair is bolstered by the upbeat US February Producer Price Index (PPI) data. Furthermore, the weaker-than-expected Indian WPI inflation exerts some selling pressure on the INR and creates a tailwind for the USD/INR pair. India’s wholesale inflation for February cooled to a four-month low, according to the statistics ministry on Thursday. This report could form the basis for the Indian central bank’s monetary policy actions.
Nonetheless, the markets expect the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) to hold the interest rate steady in the next meeting and might cut the repo rate in the second half of the calendar year 2024. The RBI is unlikely to precede the Fed in this rate cut cycle. This, in turn, might lift the Indian Rupee and cap the upside of the pair. Moving on, investors will keep an eye on the Indian Trade Balance data, due on Friday. Also, the US Industrial Production and the preliminary Michigan Consumer Sentiment will be released later in the day.
Daily Digest Market Movers: Indian Rupee remains vulnerable amid the multiple headwinds and uncertainties
- India’s Wholesale Price Index-based inflation dropped to a four-month low, dropping to 0.20% YoY in February from 0.27% in January, worse than the market expectation of 0.25%.
- The Indian WPI Food climbed 6.95% YoY in February from the previous reading of 6.85%, while the WPI Fuel fell by 1.59% YoY from a 0.51% drop in January.
- The Indian WPI Manufacturing Inflation for February came in at -1.27% YoY versus -1.13% prior.
- US Retail Sales jumped 0.6% MoM in February from a downwardly revised -1.1% in the previous month, below the market consensus of a 0.8% m/m rise.
- The US PPI figure rose 0.6% MoM in February from 0.3% MoM in January, while the Core PPI figure climbed 0.3% MoM from a 0.5% gain in January.
- The US weekly Initial Jobless Claims for the week ending March 9 decreased by 1,000 to 209,000 from the previous week’s print of 210,000, better than the market expectation of 218,000.
Technical Analysis: Indian Rupee continues its rangebound movement between 82.60 and 83.15 in the longer term
Indian Rupee trades softer on the day. USD/INR remains stuck within a multi-month-old descending trend channel around 82.60–83.15 since December 8, 2023.
From a technical perspective, USD/INR keeps the bearish vibe in the near term as the pair holds below the key 100-day Exponential Moving Average (EMA) on the daily chart. However, the 14-day Relative Strength Index (RSI) returns above the 50.0 midlines, indicating that further upside cannot be ruled out for the time being.
The first upside barrier for the pair will emerge near 83.00, portraying the confluence of the 100-day EMA and a psychological round figure. Any follow-through buying will pave the way to the upper boundary of the descending trend channel near 83.15. A bullish breakout of this level could signal that buyers are taking over and could allow USD/INR to reach the next upside target near a high of January 2 at 83.35, followed by the 84.00 round mark.
On the other hand, a low of March 14 at 82.80 acts as an initial support level for the pair. The critical support is located at the lower limit of the descending trend channel at 82.60. A break below 82.60 could drag the pair lower to a low of August 23 at 82.45, and finally a low of June 1 at 82.25.
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 strongest against the New Zealand Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.60% | 0.92% | 0.38% | 0.89% | 1.10% | 1.24% | 0.82% | |
| EUR | -0.60% | 0.32% | -0.22% | 0.30% | 0.50% | 0.65% | 0.22% | |
| GBP | -0.92% | -0.32% | -0.54% | -0.02% | 0.18% | 0.33% | -0.09% | |
| CAD | -0.38% | 0.21% | 0.53% | 0.51% | 0.69% | 0.85% | 0.42% | |
| AUD | -0.90% | -0.30% | 0.02% | -0.52% | 0.21% | 0.35% | -0.07% | |
| JPY | -1.09% | -0.50% | 0.07% | -0.72% | -0.19% | 0.15% | -0.28% | |
| NZD | -1.25% | -0.65% | -0.33% | -0.87% | -0.35% | -0.15% | -0.43% | |
| CHF | -0.81% | -0.21% | 0.11% | -0.42% | 0.09% | 0.27% | 0.43% |
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).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.