The Impact of External Factors on the Indian Rupee Exchange Rate

The Impact of External Factors on the Indian Rupee Exchange Rate

The Indian Rupee (INR) has been facing pressure in early Asian trading on Wednesday due to the weakening in Asian currencies and increased demand for USD by importers. Investors are closely monitoring the speeches by the Federal Reserve’s Christopher Waller and Raphael Bostic for potential market-moving insights. On the domestic front, positive market sentiment and Fed Chair Jerome Powell’s dovish comments from the Jackson Hole meeting are providing some support for the INR.

The upcoming release of the US GDP Annualized for Q2 and the spotlight on the US Personal Consumption Expenditures Price Index are expected to drive market sentiment. Furthermore, India’s projected GDP growth of 7% in 2024 by the International Monetary Fund has positioned the country as the fastest-growing major economy globally. However, concerns over slower economic growth in the April-June quarter have been highlighted in a Reuters poll due to lower government spending.

From a technical standpoint, the USD/INR pair maintains a positive outlook with the price trading above the key 100-day Exponential Moving Average (EMA) and the 14-day Relative Strength Index (RSI) suggesting a support level around 58.00. The immediate resistance level for the pair is at 84.00, with a potential move towards 84.24 and 84.50 in case of further buying momentum. On the downside, the support level is at 83.77 followed by the 100-day EMA at 83.60.

The Indian Rupee is highly sensitive to external factors such as the price of Crude Oil, the value of the US Dollar, and levels of foreign investment. The Reserve Bank of India (RBI) actively intervenes in the forex markets to maintain stability in the exchange rate and adjust interest rates to control inflation. Macroeconomic indicators like inflation, interest rates, GDP growth, balance of trade, and foreign investment inflows all play a significant role in determining the value of the Rupee.

The INR’s performance is closely tied to global market trends and key economic indicators. Market participants are actively monitoring developments in the US economy, Fed policy, and domestic economic data to gauge the future trajectory of the Indian Rupee. With the RBI’s intervention in the forex market and efforts to control inflation, the Rupee’s value will continue to be influenced by external factors and macroeconomic conditions.

The Indian Rupee’s exchange rate is subject to a wide range of external influences and market dynamics. While short-term fluctuations may occur due to changing investor sentiment and economic data releases, the long-term outlook for the INR will depend on factors such as global economic trends, central bank actions, and domestic macroeconomic indicators. Investors and traders alike must stay informed and monitor key developments to navigate the complex landscape of currency markets and make informed trading decisions.

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