October 23, 2024
New Delhi, India
Rupee Analysis
The Indian Rupee (INR) remained stable against the US Dollar (USD) on Wednesday, despite continued pressure from foreign investor outflows. Traders noted that the Reserve Bank of India’s (RBI) possible interventions played a role in limiting the upward movement of the USD/INR pair.
Foreign Outflows Weigh on INR
Foreign institutional investors (FIIs) have sold around $10 billion worth of Indian stocks in October, surpassing the previous record outflow of $8.35 billion in March 2020. These outflows have put downward pressure on the Indian Rupee, bringing the USD/INR pair closer to all-time highs.
Global Factors Impact USD Strength
The US Dollar has gained strength as US Treasury yields continue to rise amid increased risk aversion. Yields on 2-year and 10-year US Treasury bonds are currently at 4.04% and 4.21%, respectively.
Minneapolis Federal Reserve President Neel Kashkari highlighted that while rate cuts are expected in the coming quarters, they are likely to be gradual and modest. According to the CME FedWatch Tool, there is a 91% chance of a 25-basis-point rate cut, with no expectations for a larger 50-basis-point reduction.
BRICS Summit and Geopolitical Discussions
During the ongoing 16th BRICS Summit in Kazan, Indian Prime Minister Narendra Modi met with Russian President Vladimir Putin to discuss the Ukraine conflict. Modi expressed India’s willingness to assist in reaching a peaceful resolution. Modi is also expected to meet with Chinese President Xi Jinping as part of the summit’s diplomatic engagements.
RBI’s Economic Outlook
In its October bulletin, the Reserve Bank of India projected a rebound in aggregate demand, fueled by festive season spending and rising consumer confidence. This is expected to counter the temporary economic slowdown seen in the second quarter of 2024.
USDINR was trading flat at 84 by 11:19 AM IST today.
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