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USD/INR maintains its position near all-time highs heading into the 16th BRICS summit

Posted on by Kennedy
USD/INR maintains its position near all-time highs heading into the 16th BRICS summit

  • The Indian rupee is struggling near its all-time low due to foreign selling of Indian stocks.
  • Prime Minister Modi is expected to meet Chinese President Xi Jinping during the BRICS summit.
  • The Indian rupee could hold its own if the RBI intervenes in the market by selling US dollars.

The Indian Rupee (INR) remained stable against the US Dollar (USD) on Tuesday, supported by the possibility of market interventions by the Reserve Bank of India (RBI), which helped the INR weather equity outflows and dollar strength .

However, ongoing foreign selling continues to put pressure on the INR, while concerns over the Middle East conflict have impacted risk-sensitive currencies. Foreign capital outflows from Indian equities are likely to continue as investors shift funds from India to China due to recent stimulus measures and relatively lower valuations.

Prime Minister Narendra Modi traveled to Russia to attend the 16th BRICS summit in Kazan. During the visit, Modi is scheduled to hold bilateral talks with Russian President Vladimir Putin. He is also expected to meet with Chinese President Xi Jinping and hold talks with leaders of other BRICS member countries.

Daily Digest Market Movers: Indian rupee pressured by foreign outflows

  • The US dollar (USD) gained support following a rise in US Treasury yields, which climbed over 2% on Monday. This increase was fueled by signs of economic resilience and growing concerns about a possible resurgence of inflation in the United States, reinforcing expectations of tighter monetary policy.
  • According to the CME FedWatch tool, the probability of a 25 basis point rate cut in November is 89.1%, with no larger 50 basis point cut expected.
  • Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, stressed Monday that the Fed is closely watching the U.S. labor market for signs of rapid destabilization. Kashkari warned investors to expect a gradual pace of rate cuts in the coming quarters and suggested that monetary easing would be moderate rather than aggressive.
  • Foreign institutional investors have sold around $10 billion worth of Indian stocks so far in October, surpassing the previous record outflow of $8.35 billion in March 2020, according to a Reuters report.
  • The Reserve Bank of India said in its October bulletin that overall demand in India is expected to recover from the temporary slowdown observed in the second quarter, driven by a surge in holiday demand and increased consumer confidence.

Technical analysis: USD/INR remains above 84.00, near all-time high

The USD/INR pair is trading around 84.10 on Tuesday. Analysis of the daily chart shows the pair consolidating within an ascending channel pattern, indicating a bullish bias. The 14-day Relative Strength Index (RSI) remains above the 50-level, further confirming the prevailing bullish momentum.

As for resistance, the USD/INR pair may face a hurdle at its all-time high of 84.14 reached on August 5, followed by the upper boundary of the ascending channel at 84.20.

On the downside, immediate support appears at the nine-day exponential moving average (EMA) around the 84.01 level, which coincides with the lower boundary of the ascending channel near the psychological level of 84.00.

USD/INR: daily chart

US dollar PRICE today

The table below shows the percentage change in the US Dollar (USD) against the listed major currencies today. The US dollar was strongest against the Canadian dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.11% -0.18% -0.03% -0.02% -0.42% -0.40% -0.15%
EUR 0.11% -0.06% 0.10% 0.07% -0.34% -0.28% -0.04%
GBP 0.18% 0.06% 0.16% 0.15% -0.27% -0.23% 0.02%
JPY 0.03% -0.10% -0.16% -0.00% -0.40% -0.40% -0.13%
CAD 0.02% -0.07% -0.15% 0.00% -0.39% -0.38% -0.13%
AUD 0.42% 0.34% 0.27% 0.40% 0.39% 0.02% 0.27%
NZD 0.40% 0.28% 0.23% 0.40% 0.38% -0.02% 0.25%
CHF 0.15% 0.04% -0.02% 0.13% 0.13% -0.27% -0.25%

The heatmap shows percentage changes between the most important currencies. 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 US dollar from the left column and switch to the Japanese yen along the horizontal line, the percentage change shown in the field will be USD (basis)/JPY (rate).

RBI FAQs

The role of the Reserve Bank of India (RBI), in its own words, is to “maintain price stability while keeping the growth objective in mind.” This includes keeping the inflation rate at a stable level of 4%, primarily with the help of interest rates. The RBI also maintains the exchange rate at a level that does not cause excessive volatility and problems for exporters and importers as India's economy is heavily dependent on foreign trade, especially oil.

The RBI formally meets for six bi-monthly meetings per year to discuss its monetary policy and adjust interest rates if necessary. When inflation is too high (above its 4% target), the RBI usually raises interest rates to discourage borrowing and spending, which can support the rupee (INR). If inflation falls too far below the target, the RBI could cut interest rates to encourage more credit, which may negatively impact the INR.

Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in the foreign exchange markets to maintain the exchange rate within a limited range. This is to ensure that Indian importers and exporters are not exposed to unnecessary currency risk in times of volatile exchange rates. The RBI buys and sells rupees in the spot market at key levels and uses derivatives to hedge its positions.

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