USD/INR Emerges as Steadiest Major Currency

USD/INR Emerges as Steadiest Major Currency

Key Points:

  • Despite global volatility, USD/INR is the least volatile major currency in FY 2023-24, supported by interbank USD sales in India.
  • Trading above its 100-day EMA, the USD/INR shows bearish potential with key support and resistance levels identified.

In finance, the Indian Rupee (INR) has exhibited remarkable resilience, extending its rally on Friday and maintaining its strength in a volatile global environment. In fiscal year 2023-24, the INR was the least volatile major currency, a notable achievement given global challenges. Persistent interbank USD sales in India have created a robust backbone, supporting INR stability.

Additionally, the INR has benefited from a softer US Dollar (USD), which has weakened against key international currencies. The easing of geopolitical tensions in the Middle East further supports this trend. Additionally, a significant recovery in crude oil prices has historically impacted the INR due to India’s substantial oil imports. However, the scenario is full of challenges; foreign capital outflows and expectations of a hawkish rate cut by the US Federal Reserve have threatened the INR’s stability.

US Dollar: Influenced by Hawkish Fed & Global Shifts

The US Dollar, conversely, finds itself in a complex interplay of international monetary forces. Due to high inflation, the USD has weakened against major global currencies, somewhat mitigated by the Federal Reserve’s hawkish stance. These dynamics underscore the intricate balance of currency strengths influenced by domestic economic policies and international geopolitical events.

USD/INR Markets’ Outlook: Elections & Inflation

Several pivotal events are set to shape the trajectory of currency markets in the coming months. The US March PCE Price Index’s final reading will provide critical insights into inflation trends, influencing Fed policies. Simultaneously, investors closely watch India’s general election, from April 19 to June 1, as its outcome could impact economic reforms and fiscal stability in one of Asia’s largest economies.

USD/INR Analysis: Trading Above 100-Day EMA

From a technical standpoint, the USD/INR pair shows interesting trends. Currently trading above its 100-day Exponential Moving Average (EMA), the pair exhibits potential bearish signals with a 14-day Relative Strength Index (RSI) around 48. Support levels are crucially positioned at 83.10-83.15, 82.78, and 82.65, providing potential floors for price movements. Resistance levels at 83.50, 83.72, and 84.00 mark significant ceilings that could cap upward trends.

India’s Record Forex Reserves as of March 2024

India’s economic indicators, particularly its foreign exchange reserves, hit a record high in March 2024, covering 11 months of projected imports and more than 100% of its total external debt. This financial cushion significantly enhances India’s economic resilience, allowing it to manage external shocks more effectively.