Ahead of the RBI's monetary policy announcement on Wednesday, the value of the Indian Rupee declines somewhat versus the US dollar.
Regarding whether the RBI will lower interest rates or keep them the same, investors have differing opinions.
The possibility of a US government shutdown is putting pressure on the US dollar.
Monday's opening price of the Indian Rupee (INR) is somewhat lower than the US dollar (USD). Even as the US dollar continues its drop, the USD/INR is edging up to close to 88.90, indicating weakness in the Indian rupee.
Ahead of the Reserve Bank of India's (RBI) monetary policy pronouncement on Wednesday, the Indian currency is under selling pressure as investors exercise prudence. Participants in the financial markets have differing opinions about whether the RBI will further lower its repo rate.
According to Citi analysts, the RBI may decide to implement a dovish pause or cut insurance in response to trade concerns between the US and India over New Delhi's purchase of oil from Russia. The RBI has already lowered its repo rate to 5.5% this year, a 100 basis point (bps) decrease.
On the other hand, policymakers may be deterred from approving additional interest rate reduction by positive GDP growth, the reform of the Goods and Services Tax (GST) structure to increase consumption, and robust holiday demand, according to analysts at HDFC Securities.
In the meantime, the Indian Rupee has continued to be significantly weakened by the ongoing flight of foreign capital from the Indian stock market. Foreign Institutional Investors (FIIs) sold Indian equity shares on Friday for a total of Rs. 5,687.58 crores. FIIs have sold stakes totaling Rs. 30,141.68 crores so far in September.
As the US government shutdown deadline approaches, the US dollar continues to decline.
Amid fears of a US government shutdown on Wednesday due to the short-term funding plan still pending passage by the House and Senate, the US dollar made significant corrections against its peers at the beginning of the week.
As of this writing, the US Dollar Index (DXY), which compares the value of the US dollar to six other major currencies, is down 0.25% to close to 97.90. After failing to sustain an upward rise over 98.60 that lasted more than a week, the USD Index began to drop on Thursday.
Despite holding a majority in the Senate and the House of Representatives, Republicans need some Democrats to back the funding bill in order to pass it with at least 60 votes and prevent a government shutdown. Democrats have responded by refusing to back the package because they want Republicans to reverse the recently disclosed healthcare budget cuts.
Due to a week full of US data, investors could expect high volatility in the US dollar this week. Market players will closely monitor data pertaining to the US labor market in order to gain insight into the state of the labor market at the moment. Chair Jerome Powell and other members of the Federal Open Market Committee (FOMC) have recently indicated in their remarks that they are more worried about decreasing labor demand and inflation staying beyond the central bank's 2% objective.
In light of mounting labor market vulnerabilities, Fed Vice Chair for Supervision Michelle Bowman made the case for interest rate cuts on Friday. "If these conditions persist, I [Bowman] am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward," Bowman stated, adding that "we are at serious risk of already being behind the curve in addressing deteriorating labor market conditions," according to Reuters.
Technical Analysis: Around 89.10, the USD/INR oscillates close to its all-time high.
After reaching a new all-time high of about 89.12 last week, the USD/INR has been trading sideways for the past three trading days. More potential in the pair is indicated by the upward-sloping 20-day Exponential Moving Average (EMA), which is close to 88.42.
A strong bullish momentum is shown by the 14-day Relative Strength Index (RSI) remaining above 60.00.
The 20-day EMA will provide crucial support for the major while looking downward. On the plus side, the pair's biggest obstacle would be the round number of 90.00.
Regarding whether the RBI will lower interest rates or keep them the same, investors have differing opinions.
The possibility of a US government shutdown is putting pressure on the US dollar.
Monday's opening price of the Indian Rupee (INR) is somewhat lower than the US dollar (USD). Even as the US dollar continues its drop, the USD/INR is edging up to close to 88.90, indicating weakness in the Indian rupee.
Ahead of the Reserve Bank of India's (RBI) monetary policy pronouncement on Wednesday, the Indian currency is under selling pressure as investors exercise prudence. Participants in the financial markets have differing opinions about whether the RBI will further lower its repo rate.
According to Citi analysts, the RBI may decide to implement a dovish pause or cut insurance in response to trade concerns between the US and India over New Delhi's purchase of oil from Russia. The RBI has already lowered its repo rate to 5.5% this year, a 100 basis point (bps) decrease.
On the other hand, policymakers may be deterred from approving additional interest rate reduction by positive GDP growth, the reform of the Goods and Services Tax (GST) structure to increase consumption, and robust holiday demand, according to analysts at HDFC Securities.
In the meantime, the Indian Rupee has continued to be significantly weakened by the ongoing flight of foreign capital from the Indian stock market. Foreign Institutional Investors (FIIs) sold Indian equity shares on Friday for a total of Rs. 5,687.58 crores. FIIs have sold stakes totaling Rs. 30,141.68 crores so far in September.
As the US government shutdown deadline approaches, the US dollar continues to decline.
Amid fears of a US government shutdown on Wednesday due to the short-term funding plan still pending passage by the House and Senate, the US dollar made significant corrections against its peers at the beginning of the week.
As of this writing, the US Dollar Index (DXY), which compares the value of the US dollar to six other major currencies, is down 0.25% to close to 97.90. After failing to sustain an upward rise over 98.60 that lasted more than a week, the USD Index began to drop on Thursday.
Despite holding a majority in the Senate and the House of Representatives, Republicans need some Democrats to back the funding bill in order to pass it with at least 60 votes and prevent a government shutdown. Democrats have responded by refusing to back the package because they want Republicans to reverse the recently disclosed healthcare budget cuts.
Due to a week full of US data, investors could expect high volatility in the US dollar this week. Market players will closely monitor data pertaining to the US labor market in order to gain insight into the state of the labor market at the moment. Chair Jerome Powell and other members of the Federal Open Market Committee (FOMC) have recently indicated in their remarks that they are more worried about decreasing labor demand and inflation staying beyond the central bank's 2% objective.
In light of mounting labor market vulnerabilities, Fed Vice Chair for Supervision Michelle Bowman made the case for interest rate cuts on Friday. "If these conditions persist, I [Bowman] am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward," Bowman stated, adding that "we are at serious risk of already being behind the curve in addressing deteriorating labor market conditions," according to Reuters.
Technical Analysis: Around 89.10, the USD/INR oscillates close to its all-time high.
After reaching a new all-time high of about 89.12 last week, the USD/INR has been trading sideways for the past three trading days. More potential in the pair is indicated by the upward-sloping 20-day Exponential Moving Average (EMA), which is close to 88.42.
A strong bullish momentum is shown by the 14-day Relative Strength Index (RSI) remaining above 60.00.
The 20-day EMA will provide crucial support for the major while looking downward. On the plus side, the pair's biggest obstacle would be the round number of 90.00.
