September 5, 2024
New Delhi, India
USDINR Today
The Indian Rupee (INR) weakened during Thursday’s early European session, pressured by a sell-off in Indian equities tracking negative global cues. Despite a weaker US Dollar (USD), the INR is edging closer to all-time lows.
Key Highlights:
- Equity Sell-Off Pressures INR: A significant sell-off in domestic equities, influenced by global market sentiments, is dragging the INR lower. Despite this pressure, the Reserve Bank of India (RBI) may intervene through USD sales to prevent the rupee from breaching the critical 84 mark.
- Crude Oil Price Impact: A decline in crude oil prices could help limit the rupee’s losses, given that India is the world’s third-largest oil consumer and importer. Lower oil prices reduce import costs, which can help stabilize the local currency.
- US ISM Services PMI and Market Expectations: Investors are eyeing the US ISM Services Purchasing Managers Index (PMI), due later today. The PMI is expected to ease slightly to 51.1 in August from 51.4 in July. Additionally, Friday’s US Nonfarm Payrolls (NFP) report may provide insights into the Federal Reserve’s future rate cuts.
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Market Sentiments and RBI’s Role:
- US Labor Market Data: Recent data from the US Job Openings and Labor Turnover Survey showed a drop in available positions to 7.67 million in July, down from a revised 7.91 million in June. This figure was below market expectations, adding pressure on the USD.
- Fed Rate Cut Speculation: Raphael Bostic, President of the Atlanta Federal Reserve, indicated a readiness to cut interest rates despite inflation remaining above the Fed’s target. Market participants are currently pricing in a 57% probability of a 25-basis point rate cut by the Fed in September, with a 43% chance of a 50-basis point reduction, as per the CME FedWatch tool.
Outlook for the Indian Rupee:
- Near-Term Expectations: According to a Reuters poll, the Indian rupee is expected to strengthen slightly, moving from Wednesday’s rate of 83.96 to the dollar to 83.92 in one month and 83.75 in three months.
- Market Dynamics: The HSBC India Services PMI improved to 60.9 in August, above the consensus of 60.4, indicating strong growth in the service sector. However, the rupee’s performance remains closely tied to global market trends, RBI actions, and crude oil price movements.
The Indian Rupee remains under pressure due to a sell-off in equities and global market uncertainties. However, RBI’s possible intervention and falling crude prices might help stabilize the currency. With critical US economic data and Fed decisions on the horizon, currency market participants should brace for potential volatility.
Disclaimer:
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