USDINR Gains Amid Dollar Demand, Eyes on RBI Rate Decision & US Jobless Claims


December 7, 2023

New Delhi, India

Rupee Under Pressure

The Indian Rupee (INR) faced downward pressure as the US Dollar (USD) strengthened, with attention focused on the Reserve Bank of India’s (RBI) upcoming monetary policy decision. Anticipation surrounds the likelihood of the RBI maintaining the repo rate at 6.5%, considering factors such as elevated inflation, volatile crude oil prices, and concerns about El Nino’s impact on agricultural output.

Market Dynamics:

  • USDINR Dynamics: The Indian Rupee weakened against the US Dollar, influenced by increased demand for the greenback.
  • RBI Monetary Policy Meeting: The three-day meeting began, with expectations that the RBI will keep the interest rate unchanged at 6.50% due to various economic factors.

Upcoming Events:

  • US Jobless Claims: Investors are closely watching the US weekly Jobless Claims ahead of the RBI rate decision and US employment data, including Nonfarm Payrolls and Unemployment Rate on Friday.
  • RBI Decision: The RBI Governor, Shaktikanta Das, is expected to announce the Monetary Policy Committee (MPC) decision on Friday, with the prevailing expectation of maintaining the repo rate.

Factors Influencing INR:

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  • Inflation and Oil Prices: Elevated inflation above the 4% target and volatility in crude oil prices are key factors affecting the RBI’s decision-making.
  • Global Economic Indicators: The US employment data, including Nonfarm Payrolls, will likely influence market sentiment and impact the USDINR pair.

Market Developments:

  • Services Sector Growth: The Indian Rupee weakened due to a slowdown in services sector growth, impacting equities.
  • India’s Economic Outlook: Despite challenges, India’s stock market value surpassed $4 trillion, reflecting positive sentiment driven by oil prices, economic data, and foreign inflows.

Technical Analysis:

  • USD/INR Pair: The pair remains within a trading range of 82.80–83.40, showing a bullish trend. The 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) support the upward momentum.
  • Key Levels: Upside barriers include 83.40 and the year-to-date high of 83.47, with psychological resistance at 84.00. Strong support is at 83.00, and a break below may lead to 82.80 and 82.60.

Global Economic Indicators:

  • S&P Global India Services PMI: Eased to 56.9 in November, signaling a slight deceleration in the services sector.
  • ADP Private Payrolls: Rose to 103K in November, below market estimates, indicating some softness in the job market.
  • Fed Interest Rate Expectations: Analysts anticipate the Fed to hold interest rates until at least July, reflecting a perceived end to the tightening cycle.

Bottom Line:

The USDINR pair faces upward pressure driven by renewed USD demand. Attention is on the RBI rate decision, with the market expecting the status quo, while global economic indicators, especially the US Jobless Claims and Nonfarm Payrolls, play a crucial role in shaping future market sentiment.

Rupee vs Dollar: Currency Market Analysis