The Indian Rupee (INR) experienced a loss in momentum on Wednesday, attributed to the surge in crude oil prices, reaching nearly a five-month high. As India stands as the world’s second-largest oil importer, this increase exerted selling pressure on the INR. Furthermore, escalating geopolitical tensions in regions such as the Middle East and the Russia-Ukraine conflict are anticipated to contribute to further hikes in crude oil prices, consequently dragging the INR lower. Nevertheless, the INR’s downside might be mitigated by robust Indian economic data and an optimistic outlook for the Indian economy.
In upcoming developments, the final reading of the Indian HSBC Services PMI for March is scheduled for Thursday. Additionally, Reserve Bank of India (RBI) Governor Shaktikanta Das is set to reveal the first monetary policy of the financial year 2024–25 on Friday. Analysts widely anticipate the RBI to maintain its key repo rate at 6.50% during its April meeting, alongside upholding its stance of withdrawal of accommodation.
On the US front, Wednesday will see the publication of the ADP Employment Change and the ISM Services PMI. Later in the week, Friday will bring the release of the Nonfarm Payrolls (NFP).
In other financial news, oil prices have surged to their highest level in five months, driven by concerns over potential disruptions in supply due to rising tensions in the Middle East. Meanwhile, India’s HSBC Manufacturing PMI for March rose to 59.1, slightly below market consensus.
The RBI recently announced a change in its forex derivative contracts policy, restricting exchanges to offer such contracts involving the INR only for contracted exposure or hedging, effective April 5. Additionally, the RBI’s Monetary Policy Committee (MPC) opted to maintain the benchmark interest rate at 6.5% during its last meeting in February, citing inflationary concerns.
Federal Reserve officials have expressed varying views on potential rate cuts in the US, with Cleveland Fed President Loretta Mester anticipating rate cuts this year, though not in the upcoming May policy meeting. Conversely, San Francisco Fed President Mary Daly suggested that three rate cuts in 2024 seem plausible, contingent upon further evidence.
Technical analysis indicates a bullish trend for USD/INR, with the pair surpassing a descending trend channel observed over the past four months. In the near term, USD/INR remains above the key 100-day Exponential Moving Average (EMA), with the Relative Strength Index signaling further upside potential. Key levels to monitor include 83.49 and 83.70 on the upside, and 83.20 and 83.00 on the downside.
