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USD/INR Makes up for Some of the Ground It Lost Ahead of the Release of US GDP Data

Leon Kramer

ByLeon Kramer

Feb 28, 2024
USD/INR Makes up for Some of the Ground It Lost Ahead of the Release of US GDP Data

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  • Indian Rupee depreciates due to increased demand for USD.
  • The USD/INR exchange rate is expected to stay within a limited range because of the USD coming in and the possible involvement of the RBI. 
  • Investors are eagerly anticipating the release of the US Gross Domestic Product (GDP) for Q4, scheduled for Wednesday. 

As a result of increased buying interest in the United States Dollar (USD), the Indian Rupee (INR) is trading at a less favorable level on Tuesday. As a result of the inflow of US dollars from exporters and the possibility of intervention by the Reserve Bank of India (RBI), it is anticipated that the pair will continue to trade within a narrow range.

In order to prevent the Indian currency from gaining an excessive amount of value as a result of ongoing inflows, the Indian central bank reportedly made consistent purchases of the United States dollar over the previous week.

MSCI-rebalancing inflows may provide additional support for INR. After the MSCI’s quarterly assessment, which will begin on February 29, it is anticipated that India will see passive investments in stocks amounting to $1.2 billion. This information comes from Nuvama Alternative & Quantitative Research.

In the latter part of this week, investors will be paying close attention to the statements that are made by a variety of officials from the Federal Reserve. Furthermore, the Personal Consumption Expenditures Price Index (PCE) is scheduled to be released on Thursday, after the publication of the United States Gross Domestic Product (GDP) for the fourth quarter, which is expected to take place on Wednesday.

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The annual growth figures for the gross domestic product (GDP) and the federal fiscal deficit are expected to be revealed on Thursday, according to the upcoming schedule for India. This coming Friday, we will see the release of the manufacturing and production PMI data for India. 

The Value of the Indian Rupee Continues to Be Susceptible to a Variety of Headwinds and Uncertainties

  • Deutsche Bank predicts that India’s actual GDP expansion rate for October- December 2023 will increase by 7.0% year on year. 
  • The RBI has projected the Consumer Price Index for the financial year 2025 to be 4.5%, with the first quarter at 5.0%, the second quarter at 4.0%, the third quarter at 4.6%, and the fourth quarter at 4.7%. 
  • Jeffrey Schmid, President of the Kansas City Federal Reserve, mentioned that the central bank still faces challenges regarding elevated inflation levels and emphasized that there is no urgency to lower interest rates in advance.
  • Last week, John Williams, President of the New York Federal Reserve, cautioned about the potential for rate reductions happening sooner than expected, mentioning that the central bank is set to decrease borrowing expenses in the upcoming months.
  • Fed Governor Christopher Waller suggested that the central bank should postpone reducing interest rates for a few additional months to gather further proof from inflation statistics.

The Indian Rupee Continues to Be Contained Inside a Trading Range That Is Long-Term

The Indian Rupee is currently trading lower for the day. The USD/INR pair has been moving within a downward trend channel between 82.70 and 83.20 for several months starting from December 8, 2023. 

In the immediate future, the negative sentiment of USD/INR continues as the pair remains below the important 100-day Exponential Moving Average (EMA) on the daily chart. There is also a downward trend indicated by the 14-day Relative Strength Index (RSI), positioned below the 50.0 midline, suggesting the possibility of more decline. 

The area for short-term technical assistance is located at the bottom boundary of the downward trend channel at 82.70. If the price drops below 82.70, it may retest the support levels at 82.45 and 82.25.

However, the initial positive resistance point can be found at the intersection of a mental whole number and the 100-day Exponential Moving Average at 83.00. An apparent breakthrough beyond this level could attract additional buyers and prolong its intraday upward movement toward the upper limit of the downward trend channel at 83.20, heading towards the peak of January 2 at 83.35 and ultimately reaching 84.00.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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