- The Indian Rupee receives downward pressure from sustained outflows in Indian equities.
- Indian PM Modi is set to meet Chinese President Xi Jinping on the second day of the BRICS Summit.
- The US Dollar appreciates as Treasury yields continue to rise amid increased risk aversion.
The Indian Rupee (INR) remains relatively stable against the US Dollar (USD) on Wednesday. However, traders noted that potential interventions by the Reserve Bank of India (RBI) limited the upward movement of the USD/INR pair.
The Rupee receives downward pressure from outflows, as foreign institutional investors have sold around $10 billion in Indian stocks so far this October, exceeding the previous record monthly outflow of $8.35 billion set in March 2020, according to a Reuters report.
Indian Prime Minister Narendra Modi and Russian President Vladimir Putin on Tuesday held a meeting on the sidelines of the 16th BRICS Summit in Kazan. During their discussion, Modi expressed his desire for peace in Ukraine and conveyed that New Delhi is prepared to assist in reaching a truce to resolve Europe’s deadliest conflict. Modi is also scheduled to meet Chinese President Xi Jinping on Wednesday.
Daily Digest Market Movers: Indian Rupee faces challenges due to outflows from domestic equities
- The US Dollar appreciates as Treasury yields rise amid rising odds of nominal rate cuts by the Federal Reserve (Fed). Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.04% and 4.21%, respectively.
- According to the CME FedWatch Tool, there is a 91% probability of a 25-basis-point rate cut, with no expectation of a larger 50-basis-point cut.
- In a speech at the New York Fed Central Banking Seminar, RBI Deputy Governor Michael Patra stated, “We believe that the best defense against global risks is to strengthen the macroeconomic fundamentals and build adequate buffers, supported by prudent macroeconomic policies.” He highlighted that India’s central bank has been strategically increasing its foreign exchange reserves, which are now equivalent to or nearly equal to 12 months’ worth of imports.
- In a post on the social media platform X, Federal Reserve Bank of San Francisco President Mary Daly stated that the economy is clearly in a better position, with inflation having fallen significantly and the labor market returning to a more sustainable path.
- Federal Reserve Bank of Minneapolis President Neel Kashkari highlighted on Monday that the Fed is closely monitoring the US labor market for signs of rapid destabilization. Kashkari cautioned investors to anticipate a gradual pace of rate cuts over the coming quarters, suggesting that any monetary easing will likely be moderate rather than aggressive.
- The Reserve Bank of India stated in its October bulletin that aggregate demand in India is expected to rebound from the temporary slowdown observed in the second quarter, driven by a surge in festive demand and an increase in consumer confidence.
Technical Analysis: USD/INR maintains position above 84.00, nine-day EMA
The USD/INR pair continues to trade above 84.00 on Wednesday. A review of the daily chart shows that the pair is consolidating within an ascending channel pattern, indicating a bullish trend. The 14-day Relative Strength Index (RSI) is also above the 50 mark, reinforcing the current bullish momentum.
In terms of resistance, the pair may encounter a challenge at its all-time high of 84.14, achieved on August 5, followed by the upper boundary of the ascending channel near 84.20.
On the support side, immediate backing is found at the nine-day Exponential Moving Average (EMA) around the 84.02 level, which coincides with the lower boundary of the ascending channel close to the psychological level of 84.00.
USD/INR: Daily Chart
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.08% | 0.73% | 0.02% | 0.07% | 0.08% | 0.16% | |
| EUR | 0.05% | -0.01% | 0.77% | 0.09% | 0.15% | 0.14% | 0.20% | |
| GBP | 0.08% | 0.01% | 0.77% | 0.08% | 0.16% | 0.16% | 0.26% | |
| JPY | -0.73% | -0.77% | -0.77% | -0.70% | -0.65% | -0.64% | -0.53% | |
| CAD | -0.02% | -0.09% | -0.08% | 0.70% | 0.06% | 0.08% | 0.18% | |
| AUD | -0.07% | -0.15% | -0.16% | 0.65% | -0.06% | 0.03% | 0.12% | |
| NZD | -0.08% | -0.14% | -0.16% | 0.64% | -0.08% | -0.03% | 0.09% | |
| CHF | -0.16% | -0.20% | -0.26% | 0.53% | -0.18% | -0.12% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.