52.9: India's HSBC Manufacturing PMI falls in August

The preliminary reading of India’s HSBC Manufacturing PMI declined to 52.9 in August versus 53.5 prior, the latest data published by S&P Global and HSBC Bank showed on Friday. The India’s HSBC Services PMI climbed to 54.5 in August from the previous reading of 53.3, while the Composite PMI rose to 54.6 in August versus 54.3 prior. Market reaction: The India's HSBC PMI data for August had little to no impact on the Indian Rupee (INR). The USD/INR pair lost 0.06% on the day to 95.72. The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, making it one of the fastest-growing economies globally. This high growth has attracted significant foreign investment, including Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. Increased investment raises demand for the Rupee (INR). Fluctuations in USD demand from Indian importers impact the INR. India imports a substantial amount of oil and gasoline, and oil prices, traded in USD, directly affect the Rupee. Higher oil prices increase USD demand, forcing Indian importers to sell more Rupees, weakening the currency. Inflation influences the Rupee’s value: higher inflation increases money supply, reducing the Rupee’s value. However, if inflation exceeds the Reserve Bank of India’s (RBI) 4% target, the RBI raises interest rates to curb it, strengthening the Rupee. Conversely, lower interest rates can depreciate the Rupee. India has run a trade deficit for most of its recent history, meaning imports exceed exports. Since international trade is primarily in USD, increased import demand can lead to a weakening Rupee. Volatile markets also spike USD demand, further depressing the Rupee.