May 22, 2024
New Delhi, India
Rupee Slides on Strong Dollar Demand, Eyes on PMI and RBI Policy Outlook
The Indian Rupee declined during Thursday’s Asian trading hours, pressured by a renewed surge in US Dollar demand, particularly from foreign banks acting on behalf of custodial clients. This shift comes amid growing market anticipation of a potential rate cut by the Reserve Bank of India (RBI) in its upcoming Monetary Policy Committee (MPC) meeting.
The RBI’s dovish tilt, combined with global policy uncertainties, has started to weigh on the local unit. However, the downside for the Rupee may be cushioned by lower crude oil prices and optimism surrounding the proposed India-US multi-phase trade agreement.
Economic Data in Focus
Traders are now turning their attention to key economic indicators scheduled for release later today. Domestically, the preliminary May reading of India’s HSBC Purchasing Managers’ Index (PMI) is expected to provide fresh insights into business activity and economic momentum.
On the international front, US data releases including the S&P Global PMI (flash), the Chicago Fed National Activity Index, initial jobless claims, and existing home sales will influence the USD/INR pair’s trajectory.
Trade Talks and Global Outlook
India’s Commerce and Industry Minister Piyush Goyal indicated that the first phase of the India-US trade deal could be finalized before July, boosting investor sentiment. Meanwhile, the RBI’s monthly bulletin acknowledged fragile global growth, with weak consumer sentiment and policy uncertainty affecting recovery despite a pause in US tariffs.
Moody’s on India’s Resilience
Moody’s Ratings added some optimism, noting that India is relatively well-insulated from global trade disruptions due to its strong domestic growth and minimal export dependency.
Fed Holds Ground Amid Political Tensions
In the US, House Speaker Mike Johnson stated that Donald Trump failed to rally full Republican support for a sweeping tax bill during a meeting with lawmakers, reflecting ongoing internal divisions.
Meanwhile, Federal Reserve officials have signaled that no rate cuts are expected during the upcoming summer meetings, with market expectations aligning accordingly. The CME FedWatch tool now shows a 71% probability that the Fed will maintain its current rate levels through the next two policy meetings.
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