September 19, 2024
New Delhi, India
USDINR Today
Rupee (INR) gained momentum on Thursday, benefiting from a softer US Dollar (USD) following a significant interest rate cut by the US Federal Reserve. The Fed reduced the federal funds rate by 50 basis points to a range of 4.75% to 5.00%, marking its first rate cut in over four years. This move has weakened the USD, providing support to the INR.
Foreign Investments Strengthen INR
In addition to the Fed’s dovish stance, persistent Foreign Institutional Investor (FII) inflows into Indian equities have further bolstered the Indian currency. These investments are adding liquidity to the market, enhancing the rupee’s appeal.
Crude Oil Prices Pose a Challenge
However, the rise in crude oil prices could limit further gains for the INR. India, being the third-largest oil consumer after the United States and China, is heavily reliant on oil imports, and higher prices could strain the country’s foreign reserves, putting pressure on the rupee.
Upcoming US Economic Data in Focus
Investors are closely monitoring key U.S. economic indicators such as weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Existing Home Sales, which are expected to be released later on Thursday. These data points could influence the trajectory of the USD and, consequently, the INR.
RBI’s Policy Outlook Unchanged
Despite the developments, the Reserve Bank of India (RBI) is unlikely to ease its benchmark policy rate in 2024, primarily due to concerns over food inflation, according to the chairman of State Bank of India, C.S. Setty.
India’s Economic Growth Stands Out
India’s Finance Minister, Nirmala Sitharaman, remarked that the country’s economic growth remains strong on the global stage and is expected to continue performing well in the coming years.
Fed’s Long-Term Outlook
The Federal Open Market Committee (FOMC) also updated its projections, raising the unemployment forecast to 4.4% by the end of 2024 and adjusting the long-term federal funds rate to 2.9%. Despite the rate cut, Fed Chair Jerome Powell emphasized that this move does not signal a shift in policy direction but aims to support both the economy and labor market.
The Indian Rupee’s short-term trajectory remains sensitive to U.S. economic data and global oil prices, but with steady FII inflows and a dovish Fed, the INR has gained some ground against the USD.
US Fed Cuts Interest Rate by 50 bps for First Time in Four Years; Signals More Reductions in 2024
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