Forex News
- USD/CAD holds near a one-month high as diverging Fed-BoC rate expectations weigh on the Canadian Dollar.
- USD/CAD remains bullish above the 50-day and 100-day SMAs, with the RSI near 66 signaling strong buying momentum.
- The pair faces immediate resistance at 1.4300, while 1.4200 offers initial support.
USD/CAD is little changed on Thursday, holding near a one-month high. A broadly stronger US Dollar (USD) and diverging interest rate expectations for the Federal Reserve (Fed) and the Bank of Canada (BoC) keep the Canadian Dollar (CAD) on the back foot. At the time of writing, USD/CAD trades around 1.4245, down 0.04% on the day.
USD strength seen pressuring Canadian Dollar as BoC hike odds fade
According to TD Securities, the US Dollar still has scope to advance against selected majors, with analysts noting that “across global major currencies, we see room for the USD to rally selectively against CAD and KRW in the near-term.” They argue that “diverging employment data releases will likely keep USDCAD supported above 1.40,” as Canada’s labour market softens relative to the US. In particular, TD highlights that a “rising unemployment rate amid falling wage growth rate in Canada also reduces the market pricing of a December BoC rate hike relative to the Fed,” reinforcing their view that the Canadian Dollar will remain under pressure against the Dollar in the near term.
Technical Analysis
USD/CAD bulls have the upper hand. The pair has erased all of its October losses and climbed above the 50-day and 100-day Simple Moving Averages (SMAs), with the 200-day SMA well below the current price.
Momentum conditions back the topside tone, with the Relative Strength Index (RSI) hovering around 66, edging toward overbought territory, while the Moving Average Convergence Divergence (MACD) remains positive and above its recent lows, hinting at sustained buying interest.
On the downside, initial support sits near 1.4200, followed by former resistance at 1.4120, which now acts as support. Below these, the cluster of trend-supporting averages between the 50-day SMA at 1.4074 and the 100-day SMA at 1.4044 should act as a deeper cushion ahead of the longer-term 200-day SMA at 1.3909.
On the upside, the October peak near 1.4300 offers immediate resistance. A break above it could open the door to further gains toward the 1.4400 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
The US Dollar (USD) has extended its upward trajectory across global foreign exchange markets, propelling the US Dollar Index (DXY) to a fresh year-to-date high of 103.08 and returning the currency to its April 2025 levels. This renewed rally is firmly anchored in real front-end rate differentials following stronger-than-expected US inflation data and hawkish Federal Reserve (Fed) rhetoric, which has prompted traders to price in a faster pace of monetary tightening. Alongside rate-driven momentum, reduced concerns over political interference at the Fed and resilient safe-haven inflows are reinforcing the Greenback’s valuation. Institutional strategists at MUFG, ING, and Rabobank assess that while near-term inflation prints and Fed communications point toward further upside, medium-term US fiscal deficit pressures remain a key variable for the US Dollar's broader outlook.
MUFG sees back-to-back December and January Fed hikes lifting the US Dollar
Lee Hardman at MUFG highlights that expectations for an accelerated Federal Reserve tightening cycle — spurred by recent strong US inflation readings — have driven the US Dollar Index DXY to a fresh year-to-date peak of 103.08. While Hardman does not anticipate a 50 bps hike in December, futures pricing points toward back-to-back 25 bps increases in December and January, making upcoming commentary from New York Fed President John Williams pivotal for confirming the rate path.
"The US dollar has continued to strengthen overnight resulting in the dollar index hitting a fresh year-to-date high of 103.08. The US dollar’s renewed upward momentum has been encouraged by expectations that the Fed is likely to speed up the pace of rate hikes in response to the recent run of stronger US inflation data... There are currently around 28bps of hikes priced by December, and 43bps of hikes priced by the following meeting in January indicating that even if the Fed hikes by 25bps in December it is now expected to quickly follow up with another 25bps hike at the start of next year... While we don’t expect a larger 50bps hike to be delivered in December, it is more likely now that the Fed could hike rates back-to-back in December and January."
ING expects front-end rate differentials and PPI data to fuel another US Dollar leg higher
Francesco Pesole and the FX strategy team at ING emphasize that the US Dollar's return to April 2025 levels is a fundamentally sound, rates-driven advance supported by real front-end yield differentials rather than excessive speculative stretching. With Fed Governor Chris Waller placing a 50 bps December rate hike on the table and market pricing still sitting at 28 bps, ING sees clear scope for hawkish repricing, identifying upcoming Producer Price Index (PPI) figures as a potential trigger for further USD gains.
"The combination of hawkish Fedspeak and a US CPI beat earlier this week continues to pay dividends for the dollar. DXY is now back at Liberation Day (April 2025) levels, with real front-end rate differentials continuing to fuel strong dollar momentum. Importantly, this remains a rates-driven move, with contained excessive USD strength relative to short-term fair value currently built in... We continue to see upside risks for the dollar in the coming days. The Fed's Chris Waller has put a 50bp December move on the radar, and that should keep markets biased towards hawkish interpretations of incoming data. December pricing remains at 28bp, leaving scope for further adjustment... Today’s home sales data are unlikely to matter, but tomorrow’s PPI will. That may be the catalyst for another USD leg higher."
Rabobank argues Fed credibility and safe-haven flows refute US Dollar debasement fears
The FX Strategy team at Rabobank contends that easing concerns over political interference at the Federal Reserve and resilient safe-haven inflows have restored Greenback credibility, allowing the currency to capitalize on robust US economic growth and upcoming Eurozone pressures. Although Rabobank warns that a US budget deficit above 6% of GDP and signs of slipping "exorbitant privilege" in the Treasury market could weigh on the USD over the medium term, the team concludes that previous US Dollar debasement fears were overstated.
"Diminished fears about political interference on the Fed is a supportive factor for the USD. In addition, at the start of the Gulf war, strong demand for the USD undermined last year’s claims that the USD’s had lost at least part of its safe haven value. In our view the USD’s safe haven appeal is linked to its embedded position in global payments systems, which could take decades to shake... Reduced concerns over the credibility of the greenback should allow it more opportunity to benefit from the US’s robust economic growth performance... There is still a risk that concerns related to the US’s unwieldly budget deficit could weigh on the USD over the medium-term. The US budget deficit at over 6% of GDP is wider than that of France... Either way, last year’s dollar debasement fears appear exaggerated."
Key Takeaway
The US Dollar's climb to a fresh year-to-date high of 103.08 reflects a powerful alignment of front-end interest rate repricing, institutional credibility, and structural safe-haven demand. While MUFG and ING highlight that sticky inflation and hawkish Fed commentary — including 28 bps to 43 bps of tightening priced across December and January alongside talk of a potential 50 bp move — leave near-term risks skewed toward further US Dollar gains on upcoming PPI data, Rabobank underscores that even with medium-term fiscal deficit risks above 6% of GDP, the Greenback's entrenched role in global financial markets keeps it firmly positioned to outperform major peers.
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- NZD/USD flatlines around 0.5550 as the reversal from the 0.5650 area loses steam.
- The US Dollar takes a break as investors discount a quarter-point Fed rate hike in October.
- Growing Fed-RBNZ monetary policy divergence is likely to keep Kiwi rallies limited.
The New Zealand Dollar (NZD) is trading practically flat against the US Dollar (USD) on Thursday, holding losses after the last two days’ reversal. The NZD/USD pair is looking for direction at the lower range of the last four weeks’ trading band, with the year-to-date low of 0.5527at a short distance, after another rejection at the 0.5650 area.
The Greenback has outperformed its peers this week, boosted by hot US Consumer Price Index (CPI) figures on Tuesday, which heightened hopes that the Federal Reserve (Fed) will hike interest rates at least by a quarter point at its December meeting.
Fed officials have endorsed that view and are likely to reiterate the hawkish stance later on Thursday. A string of policymakers from the US central bank are expected to speak in public later in the day, some of whom have already expressed concern about the elevated price pressures and their support for further monetary tightening in December.
BBH: "The USD might have run too far, too fast"
Brown Brothers Harriman’s Elias Haddad, however, cautions that “the USD rally may have run too far, too fast.” He notes that “USD has overshot the level implied by rate differentials, limiting the scope for further gains in the near-term.”
Haddad also points out that market expectations for a “jumbo 50bps fed funds rate hike in December” are likely to be tempered, as they “will likely be constrained by stagnant US real wages and the resulting headwind to consumption spending,” suggesting the possibility of some USD repositioning in the coming days.
The New Zealand Dollar received some boost at the week's opening after last weekend's election provided a narrow victory to the centre-right ruling coalition, easing concerns about a period of political uncertainty. This, however, failed to alter the negative trend triggered by the Reserve Bank of New Zealand's decision to keep interest rates on hold against expectations in late October.
In that sense, lower Oil prices provide some relief for New Zealand's economy, as the country is a net Crude importer, although they also give reasons for RBNZ's doves to stand pat on rates and increase the monetary policy divergence with the Fed.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
Brown Brothers Harriman’s (BBH) Elias Haddad notes the Dollar Index has retreated from its post-October CPI highs, with the USD rally seen as stretched versus rate differentials. He highlights that stagnant US real wages may cap expectations for a 50bps Fed hike in December.
USD rally seen stretched near term
"The dollar index (DXY) has pulled back from its highest level since early April 2025, when President Donald Trump unveiled his Liberation Day tariffs. The USD rally was fueled by a sharp repricing in fed funds rate expectations following the hot US October CPI print and amplified by hawkish Fed rhetoric."
"Nevertheless, the USD rally may have run too far, too fast. USD has overshot the level implied by rate differentials, limiting the scope for further gains in the near-term. Moreover, pricing of a jumbo 50bps fed funds rate hike in December will likely be constrained by stagnant US real wages and the resulting headwind to consumption spending."
"Today’s second-tier US data (weekly jobless claims and October existing home sales) are unlikely to move the needle, leaving Fed speakers in focus."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
The European Central Bank (ECB) is expected to raise its deposit rate by 25 basis points to 2.75% in December, according to a Reuters poll published on Thursday. All 71 economists surveyed expect a hike next month. Of those, 46 expect the deposit rate to peak at 2.75%, while 25 see another hike, most likely in the first quarter of 2027.
Economists raised their inflation forecasts from a month ago and now expect Eurozone inflation to remain around twice the ECB’s 2% target through at least the second quarter of 2027.
They see inflation averaging 3.1% in 2026 and 2.8% in 2027, up from 3.0% and 2.6% in the October poll. Core inflation is also expected to pick up, averaging 2.6% this quarter and 2.8% in the first quarter of 2027.
The growth outlook also improved. Economists now expect the Eurozone economy to expand by 1.1% in 2026 and 1.3% in 2027, up from 1.0% and 1.2%, respectively, in the October poll.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Elias Haddad at Brown Brothers Harriman (BBH) reports that the Pound (GBP) showed limited reaction to solid UK Q3 GDP, with 0.7% q/q growth driven by consumption and investment. Swaps still price a high probability of back-to-back Bank of England (BOE) hikes, pushing rates above neutral and raising future growth risks. For now, resilient UK activity is seen as supportive for GBP, particularly versus EUR.
Strong UK growth supports Pound
"GBP largely ignored the UK’s good Q3 GDP print. Real GDP increased 0.7% q/q vs. 0.5% in Q2, matching consensus and the BOE’s forecast. Household consumption and fixed investment were the main growth drivers."
"September real GDP also surprised to the upside, rising 0.2% m/m (consensus: 0%) after stagnating in August, underpinned by gains in services, production and construction."
"The swaps curve still implies about 70% odds of a back-to-back 25bps hike to 4.25% on December 17, and a total of 85bps of tightening over the next twelve months. That would push the policy rate well above the BOE’s estimated 2-4% neutral range, raising the risk of a sharper growth slowdown ahead. For now, resilient UK economic activity reinforces the case for additional BOE hikes which is GBP positive, especially against EUR."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Japanese Yen firms as intervention warnings weigh on USD/JPY near the 160.00 mark.
- A modest US Dollar pullback offers some relief, though hawkish Fed expectations limit the Yen's recovery.
- Cautious remarks from BoJ policymaker Toichiro Asada cast doubt on the pace of further rate hikes.
USD/JPY trades slightly lower on Thursday after climbing to 159.94, its highest level in more than two months. Bets on more aggressive Federal Reserve (Fed) rate hikes strengthened the US Dollar (USD), bringing the pair within touching distance of 160.00, putting the risk of Japanese intervention back in focus. At the time of writing, USD/JPY trades around 159.70, down 0.10% on the day.
Japan’s top currency diplomat, Atsushi Mimura, said on Thursday that recent currency moves had been too fast, adding that “it’s still too early to forget what happened this summer.” Japan spent a record ¥15.4 trillion buying Yen over three days between July 30 and August 3 after the currency weakened to nearly 164 per US Dollar, its lowest level in about 40 years.
Japan signals readiness to defend Yen as USD strength complicates intervention
Analysts at MUFG/BTMU argue that recent official rhetoric “sends a strong signal that Japan is prepared to intervene again to support the Yen,” a stance they believe “should help to limit further upside for USD/JPY beyond 160.00.” However, they caution that “it will be even more difficult to reverse the upward trend for USD/JPY right now with the USD strengthening broadly on the back of expectations for faster Fed rate hikes.” In their view, “if the rising risk of further intervention helps to stabilize USD/JPY while the US Dollar continues to strengthen more broadly, it could see non-USD Yen crosses moving lower.”
However, a modest pullback in the US Dollar (USD) on Thursday takes some pressure off the Japanese Yen (JPY). The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades near 102.88 after reaching 103.08, its highest level since April 2025.
Traders now fully price in a December Fed rate hike, with a 25-basis-point (bps) move the most likely outcome and a small chance of a larger 50 bps increase. Those bets firmed after hotter-than-expected US consumer inflation data earlier this week and calls from Fed officials for further hikes to bring inflation back to the 2% target.
Meanwhile, Bank of Japan (BoJ) board member Toichiro Asada warned that “rate hikes may harm the economy, reduce core inflation.” He said that with the policy rate in the neutral range, a “further hike could have greater effect on the economy” and that the BoJ “must be cautious about the pace of increases.” Asada also said current price increases “aren’t necessarily fueled by demand” given weak growth and consumption.
Traders now turn to weekly US jobless claims later on Thursday and Friday’s Producer Price Index (PPI) for fresh clues on the Fed’s December decision.
- EUR/GBP holds at higher levels, with upside attempts capped below 0.8370.
- The Euro has drawn some support from a 20% decline in Oil prices.
- In the UK, the upbeat GDP and Industrial Production data have failed to support the Pound.
The Euro (EUR) is consolidating at a slightly higher range against the British Pound (GBP) this week, mainly favoured by the lower Oil prices, although the broader trend is still showing a capped tone. The EUR/GBP has found support above 0.8350, after bouncing from lows at 0.8320 last week, yet with upside attempts limited below 0.8370 so far.
The common currency has drawn some support from the decline in Oil prices, which provides some relief to the Eurozone economies. Brent Oil has dropped about 20% from last week's highs and has been hovering just above the $90 level over the last few days, its lowest prices since early September.
On the macroeconomic front, UK Gross Domestic Product (GDP) met expectations with a 0.7% growth in the third quarter and a 1.9% yearly advance, with Industrial Production and services’ output growing beyond expectations. The impact on the Pound, however, has been muted.
In the Euro Area, the calendar is thin on Thursday, and the highlight will be European Central Bank (ECB) President Christine Lagarde’s comments at an economic event in Paris during the late US session. Lagarde, however, is unlikely to change market expectations that the bank will hike interest rates by 25 basis points at its next meeting on December 17.
Technical Analysis: Euro corrects higher within a broader bearish trend
EUR/GBP trades at 0.8358, holding a broadly neutral immediate tone, with the broader bearish trend intact after plunging more than 3% in October. Momentum indicators on 4-hour charts are mixed, as the Relative Strength Index (14) holds above the 50 midline, while the Moving Average Convergence Divergence (MACD) has slipped marginally into negative territory, altogether highlighting a lack of a clear bias.
Bulls would need to break Wednesday's high at 0.8370 and the October 28 high around 0.8380 to expose the October 26 high in the 0.8400 area. To the downside, a bearish reaction below Wednesday's low at 0.8350 brings the November 6 and 9 lows, near 0.8335, back into focus.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | 0.07% | -0.08% | -0.02% | 0.32% | 0.02% | -0.12% | |
| EUR | -0.01% | 0.06% | -0.11% | -0.04% | 0.32% | -0.00% | -0.13% | |
| GBP | -0.07% | -0.06% | -0.15% | -0.10% | 0.26% | -0.05% | -0.20% | |
| JPY | 0.08% | 0.11% | 0.15% | 0.05% | 0.40% | 0.08% | -0.05% | |
| CAD | 0.02% | 0.04% | 0.10% | -0.05% | 0.35% | 0.03% | -0.10% | |
| AUD | -0.32% | -0.32% | -0.26% | -0.40% | -0.35% | -0.30% | -0.45% | |
| NZD | -0.02% | 0.00% | 0.05% | -0.08% | -0.03% | 0.30% | -0.11% | |
| CHF | 0.12% | 0.13% | 0.20% | 0.05% | 0.10% | 0.45% | 0.11% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
- The Indian Rupee corrects after hitting a fresh six-month high against the US Dollar.
- The US Dollar outperforms its other peers as hopes of Fed’s bigger rate hike come into picture.
- FIIs continue to raise their stake in the Indian stock market.
The Indian Rupee (INR) corrects against the US Dollar (USD) on Thursday after posting a fresh six-month low. The USD/INR pair rebounds to near 94.00 from the day's low of 93.65 as the US Dollar extends its advance.
In the Asian trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, posts a fresh 18-month high at around 103.08.
What is fuelling US Dollar's rally?
The US Dollar strengthens as financial markets take the possibility of a bigger interest rate hike by the Federal Reserve (Fed) in the December policy meeting into consideration.
According to TD Securities, the “strong upside surprise in the Consumer Price Index (CPI) data makes a December hike all but certain,” with the bank reiterating that the data “certainly seals a Dec rate hike by the Fed.” Strategists note that “after Waller's speech on Tuesday, the debate has now shifted to whether the FOMC will go 25 or 50bps,” as Governor Waller’s pre-CPI remarks have sharpened the focus on the need for a potential “catch-up” move. TD Securities writes that the discussion will now centre on whether the Fed should implement a “catch-up 50bps rate hike in December, or whether to maintain course with a 25bps rate increase and provide strong guidance toward a potential January follow-through.” For now, they emphasize that “we still favor a 25bp hike with a rising risk of another hike in January.”
Why INR performed strongly in past few weeks?
Indian currency outperformed on the back of strong inflows of overseas investment into the Indian stock market. Foreign Institutional Investors (FIIs) continue to increase their investment in the Indian equity market as fresh headwinds in the global Artificial Intelligence (AI) stocks and falling energy prices have underpinned “India” as a competitive bet.
So far in November, FIIs have remained net buyers on all trading days, except Diwali Muhurat session, that fell on Sunday, November 08. Foreign investors have made a cumulative investment of Rs. 65,735.57 crore.
What are the fresh headwinds in global AI sector?
Concerns about the continuation of spending on AI infrastructure, following the victory of Democrats in the United States (US) midterm elections, pushed AI-related stocks into turmoil.
And now fears of replacement of Nvidia’s CEO Jensen Huang after reports from New York Times (NYT) of his extramarital affair with alleged Chinese spy Alice Huang and rumours of a relationship with his subordinate Kimberly Powell, Nvidia's vice president of health care, could put AI stocks under pressure.
The Wall Street Journal (WSJ) has reported that Nvidia's board was preparing to oust the CEO, adding that the next 48 hours as potentially volatile.
Lower oil prices – a tailwind for net energy importers
Falling oil prices due to hopes that the US and Iran would prefer a deal rather than renewing military attacks have improved the appeal of currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs.
As of writing, the MCX Crude Oil contract expiring on November 19 is down 2.42%, slightly below Rs. 8,000.
USD/INR Technical Analysis
In the daily chart, USD/INR trades at 94.00, maintaining a bearish near-term tone as spot holds below the 20-period exponential moving average (EMA) at 94.61. The placement of price under this short-term EMA suggests rallies remain capped for now, while the Relative Strength Index (14) at 31.96 hovers just above oversold territory, hinting that downside momentum is still present but gradually stabilizing.
The pair has rebounded and testing the breakdown of the prior hurdle placed near 94.00
On the topside, initial resistance is defined by the 20-period EMA at 94.61, and a daily close above this barrier would ease immediate selling pressure. On the downside, the six-month low at 93.65 is the immediate support; a break below that level would expose the pair to 93.00.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
- AUD/USD declines to near 0.6833 as the Australian Dollar underperforms.
- The Fed is certain to hike interest rates in the December meeting.
- Investors keenly await RBA's monetary policy minutes and Governor Michele Bullock's speech.
The Australian Dollar (AUD) underperforms its currency peers on Thursday, trading 0.15% down at around 0.6833 against the US Dollar (USD) during the European trade. The Australian currency is under pressure as market experts doubt the continuation of Reserve Bank of Australia’s (RBA) monetary tightening cycle.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.02% | 0.03% | -0.13% | -0.03% | 0.30% | 0.00% | -0.17% | |
| EUR | 0.02% | 0.06% | -0.11% | -0.01% | 0.33% | 0.03% | -0.14% | |
| GBP | -0.03% | -0.06% | -0.15% | -0.08% | 0.28% | -0.03% | -0.20% | |
| JPY | 0.13% | 0.11% | 0.15% | 0.09% | 0.43% | 0.12% | -0.04% | |
| CAD | 0.03% | 0.01% | 0.08% | -0.09% | 0.33% | 0.04% | -0.13% | |
| AUD | -0.30% | -0.33% | -0.28% | -0.43% | -0.33% | -0.29% | -0.46% | |
| NZD | -0.01% | -0.03% | 0.03% | -0.12% | -0.04% | 0.29% | -0.14% | |
| CHF | 0.17% | 0.14% | 0.20% | 0.04% | 0.13% | 0.46% | 0.14% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Analysts at OCBC Group Research highlighted the mixed signals in the last RBA’s decision, noting that while the statement cited that “inflation remains elevated and recent data indicate that it is broadly based” to justify the hike, it also acknowledged that “the increases in the cash rate target since the beginning of the year have tightened financial conditions. The economy is slowing, housing prices have fallen significantly and the unemployment rate has risen”.
OCBC further point out that the RBA has softened its forward guidance, with the statement having removed the phrase “including increasing the cash rate target further if needed”. Against this backdrop, OCBC concludes: “We expect no more hike in this cycle, and the next policy move is likely to be a cut.”
For fresh cues regarding RBA’s monetary policy outlook, investors will pay attention to monetary policy meeting minutes of the October policy meeting and Governor Michele Bullock’s speech scheduled on Tuesday.
Meanwhile, the broader strength in the US Dollar is also keeping the Aussie pair under pressure. As of writing, the US Dollar Index (DXY) trades flat at around 102.86 after giving back it early gains. During the day, the DXY posted a fresh 18-month high at 103.08.
Dollar index hits fresh high as Fed hike expectations firm into year end
Analysts at MUFG note that the US Dollar has “continued to strengthen overnight,” pushing the Dollar Index to “a fresh year-to-date high of 103.08.” They argue that the Dollar’s “renewed upward momentum has been encouraged by expectations that the Fed is likely to speed up the pace of rate hikes in response to the recent run of stronger US inflation data.” In rates, MUFG highlights that “the yield on the 2-year US Treasury has jumped high by around 33bps from the low at the end of last week although still remains below the peak set in September at 4.96%.”
On the policy outlook, MUFG points out that “a 25bps rate hike at the next FOMC meeting in December is now fully priced in, and market participants have moved further to price in small probability of larger 50bps hike.” They add that “there are currently around 28bps of hikes priced by December, and 43bps of hikes priced by the following meeting in January indicating that even if the Fed hikes by 25bps in December it is now expected to quickly follow up with another 25bps hike at the start of next year.”
According to MUFG, market expectations for a faster pace of Fed tightening have been “encouraged by hawkish comments this week by Fed officials.” They cite Governor Christopher Waller, who “stated he would consider voting for a larger 50bps hike in December,” and Dallas Fed President Lorie Logan, a current voting member, who said “the FOMC needs to implement at least two more 25bps rate increases” and that “it may be possible to move more rapidly this winter than the FOMC has moved this fall.” Chicago Fed President Austan Goolsbee, who becomes a voting member next year, also described the October CPI report as “another distressing report, borderline disturbing,” particularly highlighting that services inflation “has remained persistently high.”
MUFG stresses that “the updated views of New York Fed President John Williams could carry more weight.” They recall his recent remark that it is an “appropriate time to accumulate more information to help us determine what the appropriate stance of policy is to make sure we achieve a timely return to our 2% target.” While MUFG does not expect “a larger 50bps hike to be delivered in December,” they judge that “it is more likely now that the Fed could hike rates back-to-back in December and January.”
In their view, this evolving policy narrative is “a development that will encourage the US dollar to trade at stronger levels heading into year end.” MUFG concludes that “a sharp tightening of US financial conditions and/or ongoing drop in energy prices would likely be required to significantly push back against market expectations for faster Fed hikes at the current juncture.”
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.6835, maintaining a bearish near-term bias as spot holds clearly below the 20-period exponential moving average (EMA) at 0.6947. The location of price under this key trend reference and the breakdown of the Head and Shoulder (H&S) chart pattern hint that recent rebounds remain capped, while the Relative Strength Index (14) around 35 stays in weak territory, suggesting only modest downside momentum rather than outright oversold conditions.
On the topside, initial resistance is located at the neckline of the H&S pattern, which is at 0.6900, followed by the 20-period EMA at 0.6947, and a decisive recovery above this barrier would be needed to ease immediate selling pressure and open the way for a broader corrective bounce. Looking down, the pair could extend its decline towards 0.6800.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
RBA Governor Bullock speech
Michele Bullock is the the ninth Governor of the Reserve Bank of Australia. She commenced her current position in September 2023, replacing Philip Lowe. Bullock was the Assistant Governor (Financial System) at the Reserve Bank of Australia, a position she held since October 2016.
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