- During Friday’s Asian session, the Indian Rupee bounces back.
- In its February meeting on Friday, the RBI’s MPC lowered the repo rate by 25 basis points to 6.25%.
- Uncertainties, weak Asian rivals, and growing RBI rate reduction bets might all hurt the INR.
- Later on Friday, we’ll be watching the US labor market data for January.
After hitting a new all-time low in the previous session, the Indian Rupee (INR) rises again. For the first time in almost five years, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) agreed to lower the policy repo rate by 25 basis points (bps), to 6.25%.
The local currency is still at risk due to ongoing portfolio outflows, the uncertainty surrounding US trade tariffs, and a general drop in Asian currencies. However, the RBI’s regular action to sell US dollars through state-run banks may help keep the INR’s losses to a minimum. Investors await the January US labor market data, which includes the unemployment rate, average hourly earnings, and nonfarm payrolls (NFP), later on Friday.
Following the RBI rate decision, the Indian Rupee moves upward.
- “As a result of the positive outlook for food, inflation has decreased,” stated RBI Governor Sanjay Malhotra. It is anticipated that it would gradually moderate further and correspond with the aim.
- For the upcoming year, the Indian central bank projects that real GDP growth would be roughly 6.7% in the first quarter, 6.7% in the second, 7% in the third, and 6.5% in the fourth.
- “The uncertainty makes the environment for the Fed foggier, which is a reason to slow the pace of cuts,” Chicago Fed President Austan Goolsbee said Thursday.
- Although there has been a notable improvement in inflation, Dallas Fed President Lorie Logan stated that the US labor market is still much too strong to force the Fed to lower interest rates anytime soon.
The USD/INR shows promise, the overbought RSI warns short-term bulls to exercise care.
During the day, the Indian Rupee trades favorably. On the daily chart, the price of the USD/INR pair continues to hold above the important 100-day Exponential Moving Average (EMA), maintaining its positive outlook. Beyond the 70.00 mark, however, the 14-day Relative Strength Index (RSI) enters overbought territory, which could indicate a short-term downturn or additional consolidation.
The all-time high of 87.62 is the immediate resistance level for USD/INR. Trading above this level for an extended period of time may open the door to the psychological level of 88.00. The pair’s first support level on the downside is situated between 87.05 and 87.00, which corresponds to the round mark and the low of February 5. If the aforementioned barrier is broken, USD/INR may fall to 86.51, the February 3 low.
What function does the Reserve Bank of India serve?
“Maintaining price stability while keeping in mind the objective of growth” is the Reserve Bank of India’s (RBI) stated mission. This entails utilizing interest rates as the principal weapon to keep the inflation rate at a steady 4% level. The RBI also maintains the currency rate at a level that won’t cause excessive volatility or problems for importers and exporters because of how much India’s economy depends on foreign trade, especially oil. This ensures stability for companies who employ prop firm tech.