July 29, 2024
New Delhi, India
The Indian Rupee (INR) traded sideways on Monday despite a softer US Dollar (USD) during the Asian session. Renewed demand for the US Dollar, foreign outflows from India, and geopolitical risks are weighing on the INR. The US Federal Reserve is widely expected to keep rates unchanged at its July 30-31 meeting.
Key Highlights:
- Flat Trading: The Indian Rupee remained steady despite a weaker US Dollar. The INR’s upside is limited after reaching an all-time low last week, pressured by continuous USD demand from oil importers and outflows from local equities.
- Geopolitical Risks: Rising geopolitical tensions in the Middle East might boost the safe-haven Greenback ahead of key US events this week.
- RBI Intervention: Traders expect the Reserve Bank of India (RBI) to continue intervening in the foreign exchange market to limit volatility, potentially capping the INR’s upside in the near term.
Upcoming Events:
- Fed Interest Rate Decision: The US Federal Reserve’s interest rate decision will take centre stage on Wednesday, with no change in rates expected. Investors will closely watch Fed Chair Jerome Powell’s remarks for insights into the future path of US interest rates. Any dovish comments or hints of a rate cut in September might drag the Greenback lower.
- Economic Data: Later this week, the focus will shift to the Indian HSBC Manufacturing PMI on Thursday and the US Nonfarm Payrolls for July on Friday.
Currency Market Update July 29, 2024: USDINR, EURINR, GBPINR, JPYINR Highlights
Market Analysis:
- Dollar-Rupee Pair: Dilip Parmar, a foreign exchange research analyst at HDFC Securities, noted that the Dollar-Rupee pair is likely to move higher steadily, with support shifting upward to 83.45 and resistance at 83.85.
- Foreign Outflows: Foreign investors have net sold about $1 billion worth of Indian equities since July 23, following the Indian government’s proposal to raise taxes on profits from equity investments and on equity derivative transactions.
Geopolitical Tensions:
- Golan Heights Attack: The recent attack on the Golan Heights has raised concerns about a potential conflict between Israel and Hezbollah. Israel has accused Hezbollah of carrying out the strike, which killed at least 12 people, including children, on a football pitch. Hezbollah denies involvement in the attack, according to the BBC.
US Economic Data:
- PCE Price Index: The US Personal Consumption Expenditures (PCE) Price Index rose 2.5% year-on-year in June, compared to 2.6% in May, aligning with market expectations. On a monthly basis, the PCE Price Index increased by 0.1% after remaining unchanged in May.
- Core PCE Inflation: The US Core PCE inflation, which excludes volatile food and energy prices, climbed to 2.6% in June, matching May’s increase and exceeding the estimated 2.5%. The Core PCE Price Index rose 0.2% month-on-month in June, compared to 0.1% in May.
- Consumer Sentiment: The University of Michigan Consumer Sentiment Index jumped to 66.4 in July, exceeding both the estimation and the previous reading of 66.
USDINR: 83.734 +0.011(+0.01%) at 11:53 A.M
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