USDINR Dynamics: Factors Affecting Rupee’s Course in the Forex Marke


December 19, 2023

New Delhi, India

In the ever-evolving landscape of currency markets, the USDINR pair is navigating through a series of influences, showcasing a dynamic interplay between global and domestic factors.

Renewed USD Demand and INR Performance:

Recent market movements reveal a tug-of-war between USD and INR. The Indian Rupee experienced a temporary surge, reaching a three-month high, driven by custodial banks’ dollar sales. However, importers’ demand for the US dollar swiftly reined in the INR’s gains.

Equity Inflows and Market Sentiment:

The Indian Rupee’s resilience is underscored by strong equity inflows, contributing to positive performance ahead of an extended holiday. Overseas investors poured over $1 billion into Indian shares, signalling confidence and stability in the market.

Latest on Indian Stock Market

US Economic Indicators and Fed Expectations:

Traders are keeping a close eye on upcoming US economic indicators, including Building Permits, Housing Starts, GDP Annualized (Q3), and the Core PCE Price Index. Anticipation of three Fed rate cuts in the coming year may act as a headwind for the USD against the INR.

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Government Statements and Economic Resilience:

Indian officials emphasize the market-determined nature of the INR’s exchange rate. RBI Governor Shaktikanta Das notes lower volatility, highlighting the country’s economic fortitude. India’s foreign currency reserves hit a four-month high, standing at $606.859 billion.

Technical Analysis of USDINR:

Technically, the USD/INR pair is within a range of 82.80 to 83.40 since September. While a positive outlook is maintained, caution is advised due to the 14-day RSI below the 50.0 midline. A break below 83.00 could trigger a short-term down move, with support levels at 82.80 and 82.60.

Rupee vs Dollar

Fed Statements and Future Rate Expectations:

Statements from New York Fed President John Williams and Atlanta Fed President Raphael Bostic provide insights into the Federal Reserve’s current stance on rate cuts. Williams clarifies that rate cuts are not currently under discussion, while Bostic suggests a potential reduction in interest rates in the third quarter of 2024 if inflation falls.

As the USDINR pair navigates these multifaceted influences, traders are advised to stay vigilant, especially considering the upcoming US economic releases that could further shape the course of this currency pair.

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