The Indian Rupee (INR) faced some challenges on Wednesday as a result of increased demand for the US Dollar (USD) and the belief that the US Federal Reserve won’t be cutting interest rates anytime soon. However, despite these setbacks, the INR managed to hold its ground due to positive signals from the local stock market and the optimistic outlook for the Indian economy. In April, India’s business activity showed significant growth, reaching its highest level in nearly 14 years. This positive trend indicates that India has the potential to become the fastest-growing major economy this year.
Investors are closely watching the US March Durable Goods Orders, which are set to be released on Wednesday. Additionally, the US preliminary Gross Domestic Product (GDP) Annualized for the first quarter and the final reading of the US March Personal Consumption Expenditures Price Index (PCE) will be in focus later in the week. These indicators will provide valuable insights into the health of the US economy and could have an impact on the USD/INR exchange rate.
India’s HSBC Manufacturing Purchasing Managers Index (PMI) for April came in at 59.1, similar to the reading for March. The Services PMI also showed improvement, rising to 61.7 from 61.2. According to HSBC’s chief India economist, the strong performance in both the manufacturing and service sectors, driven by increased new orders, led to the highest composite output index since June 2010. This indicates a positive outlook for the Indian economy in the near future.
On the other hand, the US flash S&P Global Composite PMI for April dropped to 50.9 from the previous reading of 52.1, suggesting a slight slowdown in US business activity. The US S&P Global Manufacturing PMI and Services PMI also showed weaker-than-expected results for April. However, US New Home Sales saw a significant increase of 8.8% month-over-month in March, reaching the highest level since September 2023.
Despite the challenges faced by the Indian Rupee, the USD/INR pair remains bullish on the daily chart, supported by trading above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) is below the 50.00 midline, indicating a possibility of further consolidation or downside before any significant appreciation in the USD/INR pair. The immediate resistance levels for the pair are identified at 83.50 and 83.72, with further upside targets at 84.00. Conversely, key support levels are seen at 83.10–83.15, 82.78, and 82.65.
The Reserve Bank of India (RBI) plays a crucial role in maintaining the stability of the Indian Rupee and the overall economy. The RBI’s primary objective is to maintain price stability while considering the growth of the economy. To achieve this, the RBI uses tools such as interest rate adjustments to control inflation and ensure a balanced exchange rate that benefits exporters and importers. The RBI actively monitors the foreign exchange market and intervenes when necessary to prevent excessive volatility that could impact trade.
The Indian Rupee’s performance is influenced by various factors, including economic indicators, market trends, and the RBI’s interventions in the foreign exchange market. Investors and traders need to carefully analyze these factors to make informed decisions regarding their positions in the USD/INR pair.