Key points:
The Indian rupee is set to open on a stronger note on Wednesday, buoyed by rising confidence that the Federal Reserve will implement a series of rate cuts this year. Non-deliverable forwards suggest that the rupee (USDINR) will start trading in the range of 83.90-83.92 against the U.S. dollar, an improvement from the previous session’s close of 83.97.
See: Indian rupee on the rise, trading at 83.967 on the VT Markets app.
The USD/INR (US Dollar/Indian Rupee) daily chart shows a strong upward trend, with the pair currently trading at 83.967. The chart indicates that the pair has recently tested the 84.27 resistance level, which has held so far, leading to some consolidation.
The Moving Averages (MAs) are trending upwards, reflecting the bullish momentum in the market.
The MACD histogram is slightly positive, with the MACD lines above the signal line, suggesting continued upward pressure. Traders are likely watching for a breakout above 84.27, which could signal further gains for the USD/INR pair.
This anticipated rise in the rupee follows the release of U.S. producer price data, which showed a slower-than-expected increase in July, signaling continued moderation in inflation. As a result, the U.S. dollar weakened against a basket of its major counterparts, U.S. Treasury yields edged lower, and equities rallied.
For the rupee, this data offers much-needed support, especially after recent interventions by the Reserve Bank of India (RBI). The RBI has been actively defending the currency, offering dollars around the 83.97 mark to prevent a decline beyond 84, a level pressured by persistent demand for dollars from importers and traders unwinding their long rupee positions.
You might be interested to read: Rupee may drop to near 84/USD; RBI intervention likely
Investors are now factoring in 108 basis points of Federal Reserve rate cuts for this year, up from 98 basis points before the latest U.S. inflation report. A rate cut at the Federal Open Market Committee’s September meeting seems almost certain, with the odds evenly split between a 25 basis point and a 50 basis point reduction.
Despite the positive reaction to the producer price index (PPI) data, investors are now focused on the U.S. consumer inflation data due later today.
Key market indicators suggest mixed influences on the Indian rupee. The one-month non-deliverable forward is at 83.98, with an onshore premium of 7 paise. The U.S. dollar index has dipped to 102.57, while Brent crude futures have risen 0.5% to $81.1 per barrel, potentially pressuring the rupee. The ten-year U.S. Treasury yield is at 3.85%, slightly down from recent highs. Foreign investors sold a net $334.8 million in Indian shares on August 12 but bought $107.8 million in Indian bonds, showing varied investment sentiment.
As the rupee opens stronger, market participants will closely monitor the day’s developments, particularly the U.S. CPI release, which could significantly influence the direction of both the rupee and broader currency markets. The RBI’s interventions will also play a critical role in determining how the rupee navigates through the current market conditions.
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