The Indian Rupee (INR) gained traction against the US Dollar (USD) on Tuesday, buoyed by USD sales from state-run banks. However, the rupee’s upside may be constrained due to the cautious stance of US Federal Reserve (Fed) officials, which could influence the USD. Additionally, a rebound in crude oil prices might weigh on the INR, given that India is the third-largest oil consumer after the US and China.
Potential foreign exchange interventions by the Reserve Bank of India (RBI) could provide support for the rupee, limiting the pair’s upside. The upcoming US Retail Sales report, expected to show a 0.2% month-on-month increase in May, might further bolster the greenback if strong consumer spending is confirmed. Moreover, speeches from several Fed members, including Lisa Cook, Thomas Barkin, Adriana Kugler, Lorie Logan, Alberto Musalem, and Austan Goolsbee, are scheduled for later in the day.
Indian Rupee Edges Higher Despite Fed’s Hawkish Stance
The Indian Rupee is expected to trade within a range of 83.40 to 83.70 this week, according to HDFC Securities FX research analyst Dilip Parmar. Moody’s predicts that India will continue to be the fastest-growing economy in the Asia-Pacific region in 2024, sustaining last year’s domestically driven momentum.
Philadelphia Fed President Patrick Harker indicated that if the US economy performs as anticipated, the Fed might cut its benchmark interest rate once this year. Cleveland Fed Bank President Loretta Mester and Chicago Fed Bank President Austan Goolsbee emphasized the need for more confidence, stating they would wait for further data before making decisions. Meanwhile, the US NY Empire State Manufacturing Index improved to -6.0 in June from -15.6 in May, beating the forecast of -9.0, though it has remained in contraction territory since November last year. Investors currently see a nearly 62% chance of a rate cut from the Fed on September 18, according to the CME’s FedWatch Tool.
USD/INR Maintains Bullish Momentum
The Indian Rupee traded weaker on the day, with the USD/INR pair maintaining a bullish outlook. The pair has been making higher highs and higher lows since early June, staying above the key 100-day Exponential Moving Average (EMA) on the daily chart. The 14-day Relative Strength Index (RSI) supports this momentum, standing in bullish territory around 55.50.
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