The Indian Rupee (INR) has been trading on a softer note due to the modest demand for the US Dollar. Global economic growth is expected to outperform expectations, with only slight headwinds for India in the upcoming fiscal year. Investors are eagerly awaiting key economic indicators such as the Indian S&P Global Services PMI and the US ISM Services PMI for February. Additionally, the recent growth of India’s GDP by 8.4% in the October-December quarter has garnered attention, indicating a strong economic performance.
- Oil Prices: India heavily relies on oil imports, which are priced in US Dollars. Therefore, an increase in oil prices leads to a higher demand for USD, causing the Rupee to depreciate.
- Foreign Investment: India’s rapid economic growth has attracted foreign direct and indirect investments, leading to an increased demand for the Rupee.
- Inflation and Interest Rates: Inflation affects the Rupee’s value – while high inflation decreases its value, the RBI’s monetary policies to control inflation can have a positive effect on the Rupee.
- Trade Deficit: India’s trade deficit, where imports surpass exports, leads to a high demand for USD, resulting in a weaker Rupee during certain periods.
The USD/INR pair has been following a descending trend channel between 82.65 and 83.15 since December 2023, indicating a bearish sentiment in the near term. The pair is currently below the 100-day Exponential Moving Average and the Relative Strength Index (RSI) is in bearish territory, suggesting further decline. The immediate downside target is at 82.65, followed by lower levels at 82.25. On the upside, the key resistance level is at 83.00, with further targets at 83.35 and 84.00.
The US Dollar has been performing strongly against major currencies, with the New Zealand Dollar being the weakest in recent days. The Indian economy has demonstrated average growth of 6.13% between 2006 and 2023, attracting significant foreign investment. Additionally, the RBI is expected to receive a $5 billion FX swap due to healthy dollar inflows and liquidity conditions. The upcoming Indian S&P Global Services PMI and US ISM Services PMI reports are anticipated to provide further insights into economic trends.
Various factors such as oil prices, foreign investments, inflation, and trade deficit impact the value of the Indian Rupee. The technical analysis of the USD/INR pair signals a bearish trend, with key support and resistance levels identified. Market indicators and economic outlook suggest a positive trajectory for India’s economy, despite global uncertainties. Monitoring key economic indicators and external factors will be essential to gauge the future movements of the Indian Rupee in the forex market.
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