October 3, 2024
New Delhi, India
USDINR Today
The Indian Rupee (INR) saw a decline in value on Thursday, pressured by the growing demand for the US Dollar (USD) as geopolitical tensions in the Middle East heightened safe-haven flows. The risk-off sentiment, combined with rising crude oil prices, has increased selling pressure on the INR, as India is the third-largest oil consumer after the United States and China.
Key Factors Impacting INR:
- Renewed US Dollar Demand: Heightened demand for the USD amid global tensions.
- Rising Crude Oil Prices: Puts additional pressure on the INR as India heavily relies on oil imports.
- Geopolitical Tensions: Risk-off mood benefits the safe-haven USD.
Economic Data to Watch:
Investors are closely monitoring several upcoming US economic indicators:
- US September ISM Services PMI
- Weekly Initial Jobless Claims
- Final S&P Global Services PMI (due later on Thursday)
Attention will then shift to US employment data on Friday, including:
- Nonfarm Payrolls (NFP)
- Unemployment Rate
- Average Hourly Earnings
A weaker-than-expected outcome in the US jobs report could prompt the Federal Reserve to consider deeper rate cuts, potentially reducing demand for the USD.
India’s Manufacturing Sector and Rupee Valuation:
The HSBC final India Manufacturing PMI eased to an eight-month low of 56.5 in September, below both the market consensus of 56.7 and the previous reading of 57.5. This suggests that momentum in India’s manufacturing sector has softened since the strong summer months, according to Pranjul Bhandari, HSBC’s chief India economist.
Additionally, the Reserve Bank of India’s (RBI) Real Effective Exchange Rate (REER) index indicates that the Indian Rupee was 5.5% above its fair value in August, a drop from 7.7% in the previous month.
US Employment Data and Federal Reserve Commentary:
The US ADP Employment Change for September showed 143,000 new jobs added, surpassing expectations of 120,000. This is a notable increase from the revised August figure of 103,000 (previously 99,000).
Furthermore, Richmond Fed President Thomas Barkin stated that the Federal Reserve’s goal of returning inflation to 2% may take longer than anticipated, limiting how aggressively rates can be cut in the future.
The Indian Rupee’s weakening trend is being driven by multiple global factors, including geopolitical tensions, crude oil price fluctuations, and key economic data from the US. Investors will remain focused on the upcoming US employment reports, which could have further implications for USDINR.
Disclaimer:
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