February 12, 2025
New Delhi, India
USDINR
The Indian Rupee (INR) extended gains on Wednesday, supported by strong intervention from the Reserve Bank of India (RBI) and US Dollar (USD) selling by exporters and speculators. However, upside momentum remains capped by concerns over India’s sluggish growth, widening trade deficit, rising crude prices, and fresh US trade tariff risks.
Market Focus on Inflation Data
Investors are closely watching the Indian Consumer Price Index (CPI) for January, alongside Industrial and Manufacturing Output data, due later in the day. Meanwhile, in the US, CPI inflation data will be a key market mover, along with speeches from Federal Reserve officials Raphael Bostic and Christopher Waller.
Trade Tensions and INR Performance
- Rupee vs. Global Currencies: The INR has depreciated 3.60% since September 2024, a smaller decline compared to the Japanese Yen (-6.49%), Canadian Dollar (-5.71%), British Pound (-7.58%), Australian Dollar (-9.04%), and Euro (-7.53%), according to Bloomberg data.
- Foreign Outflows: Foreign investors have pulled out over $7.5 billion from Indian stocks and bonds this year, exerting additional pressure on the currency.
- DBS Bank Outlook: “The central bank’s decisive hand is likely to stabilize the rupee in the near term, with the direction thereafter dictated by global dollar movements,” DBS Bank said in a note.
Fed’s Powell on Rates and Tariffs
In his semi-annual report to Congress, Fed Chair Jerome Powell reiterated that policymakers are in no rush to cut interest rates due to strong job growth and solid economic expansion. He also warned that Donald Trump’s tariff policies could drive prices higher, making it harder for the Fed to ease monetary policy.
Outlook
With inflation data from India and the US set to be released later today, volatility in the USD/INR pair is expected. The RBI’s continued intervention will likely play a key role in limiting losses for the rupee amid ongoing trade tensions.
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