January 15, 2025
New Delhi, India
USDINR
The Indian Rupee (INR) showed signs of recovery on Wednesday, bolstered by the Reserve Bank of India’s (RBI) measured approach to currency management. Despite this, intense demand for the U.S. Dollar (USD), rising crude oil prices, and sustained foreign outflows continue to weigh on the local currency.
Key Factors Influencing the Rupee:
- RBI’s Flexible Stance:
RBI Governor Sanjay Malhotra emphasized the central bank’s willingness to let the INR move freely in line with regional peers while intervening selectively to curb excessive volatility. - Global Economic Pressures:
- Strong USD demand and higher crude oil prices remain persistent challenges.
- Foreign portfolio outflows from Indian equity markets have added to selling pressure on the Rupee.
- Mixed Economic Data:
- India’s Wholesale Price Index (WPI) inflation rose to 2.37% in December, slightly above expectations.
- Consumer Price Index (CPI) inflation softened to 5.22% year-over-year, compared to 5.48% in the prior reading.
- U.S. Producer Price Index (PPI) for December showed a moderate rise of 3.3%, below market expectations, hinting at easing inflationary pressures globally.
Key Events Ahead:
Later on Wednesday, investors will focus on:
- U.S. December CPI Data: A critical indicator for assessing Federal Reserve’s monetary policy direction.
- Fed Speeches: Statements from officials like Thomas Barkin, Neel Kashkari, John Williams, and Austan Goolsbee could shape market sentiment further.
Outlook:
While the Indian Rupee remains fragile due to external factors, the RBI’s interventions and the softening of domestic CPI inflation provide some relief. However, the currency’s trajectory will hinge on global developments, including U.S. inflation data and crude oil price trends.
The INR’s recovery reflects resilience despite global headwinds. All eyes are now on the U.S. CPI release and Fed commentary for cues on the next moves in the forex market.
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