January 16, 2023

New Delhi, India

USD/INR Analysis

Amidst rising geopolitical tensions and economic shifts, the USD/INR currency pair is witnessing fluctuations, primarily influenced by a stronger US Dollar and events in the Red Sea.

Geopolitical Factors Driving USD/INR Movement:

Recent Houthi attacks on commercial ships in the Red Sea have heightened global supply chain concerns, projecting a potential $10–20 surge in oil prices. For India, the world’s third-largest oil importer, this raises the specter of an impending oil price hike, impacting the Indian Rupee.

Economic Indicators Reflect Mixed Signals:

India’s wholesale inflation, measured by the Wholesale Price Index (WPI), surged to a nine-month high of 0.73% in December. Contributing factors include a rise in food prices, as indicated by the Wholesale Price Food Index’s YoY increase of 5.39%. However, the WPI Manufacturing for December saw a decline of 0.71% YoY.

Also Read: India’s Wholesale Inflation Surges to 9-Month High in December

Global Economic Outlook and Trade Dynamics:

Despite geopolitical tensions, the World Economic Forum (WEF) president expressed optimism about India’s economy, projecting an 8% growth rate for the year. Meanwhile, trade dynamics reveal a decrease in India’s trade deficit, with December 2023 imports at $58.25 billion and exports at $38.45 billion.

Technical Analysis and Market Trends:

From a technical standpoint, the USD/INR pair has been confined within a trading range of 82.80 to 83.40 since September 2023. The daily chart signals a negative outlook for the Indian Rupee, supported by the pair staying below the key 100-period Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) below 50.0 suggests ongoing seller control.

Upcoming Events and Market Sentiment:

Market players are closely monitoring Middle East geopolitical tensions for potential impacts on the currency pair. Additionally, attention is on the US NY Empire State Manufacturing Index and Retail Sales data, expected to influence market sentiment.

Bottom Line:

The USD/INR pair’s trajectory is shaped by a complex interplay of geopolitical events, economic indicators, and technical patterns. Traders and investors must remain vigilant, considering the dynamic landscape that combines global tensions, economic shifts, and technical dynamics.

Check full analysis of: Rupee vs Major Currencies