February 3, 2024
New Delhi, India
USDINR
The Indian Rupee (INR) slumped to a record low in Monday’s early European session, pressured by a stronger US Dollar and persistent foreign outflows.
- Key Drivers:
- US Trade Tariffs: Trump’s new tariff announcement on China, Canada, and Mexico has fueled risk aversion.
- Foreign Institutional Investor (FII) Outflows: Sustained selling pressure on Indian assets weighs on INR.
- RBI’s Intervention: Likely to step in to defend the Rupee and limit excessive volatility.
Market Developments:
- India’s Economic Data:
- HSBC India Manufacturing PMI eased to 57.7 in January from 58.0 in December.
- Forex reserves declined to $629.56 billion as of January 30, down from $701.18 billion in October.
- The Indian government targets a lower fiscal deficit of 4.4% for FY25-26, down from 4.8% this year.
- US Trade Policy Shift:
- The US will impose a 25% tariff on Canadian and Mexican imports and an additional 10% tax on Chinese goods starting Tuesday.
- China, Canada, and Mexico have vowed retaliation against the US tariffs.
- Upcoming US Economic Data:
- ISM Manufacturing PMI (Due Monday): Expected to provide fresh direction for the USD and global risk sentiment.
Outlook for INR:
While RBI intervention may cushion some downside, trade tensions and USD strength could keep INR under pressure. Markets await further clarity from US economic data.
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