January 8, 2025
New Delhi, India
USDINR
The Indian Rupee (INR) edged lower during Wednesday’s session, following its biggest one-day gain in over a month. Heavy US Dollar (USD) sales by foreign banks provided temporary relief, but ongoing foreign capital outflows and elevated crude oil prices continued to weigh on the local currency.
Key Highlights:
- Intraday Movement:
- The INR touched 85.65/$1 during the day, bolstered by a weaker dollar index.
- However, dollar buying by importers and oil companies pushed it down to 85.72/$1.
- RBI Interventions:
- The Reserve Bank of India (RBI) has drawn down forex reserves by $65 billion since their September 2024 peak to manage depreciation.
Macroeconomic Outlook:
- Geopolitical Concerns:
- Rising geopolitical tensions and downside risks to India’s growth projections have added pressure on the INR.
- India’s FY25 GDP growth is projected at 6.4%, significantly lower than the 8.2% growth in FY24.
- Global Data Watch:
- The US December Services PMI rose to 54.1, beating market expectations of 53.3.
- JOLTS Job Openings in November increased to 8.09 million, surpassing estimates of 7.7 million.
- Economists anticipate 154,000 new jobs in December, with the unemployment rate holding steady at 4.2%.
Federal Reserve Insights:
- Policy Stance:
- Atlanta Fed President Raphael Bostic emphasized caution in rate decisions, suggesting that interest rates should remain elevated to ensure price stability.
- The CME FedWatch Tool indicates a 93.5% probability that the Fed will maintain its current rate stance this month.
Market Sentiment:
Investors are focused on the upcoming FOMC Minutes, expected later on Wednesday, for insights into the Federal Reserve’s policy trajectory. Additionally, the US labor market data, set to release on Friday, will provide further cues on interest rates.
The Indian Rupee remains under pressure due to external and domestic headwinds, including rising crude prices and capital outflows. Market participants await clarity from global economic data and central bank policy developments to assess the Rupee’s near-term trajectory.
At the time of writing, USDINR was trading 85.80 INR up +0.0170+0.02% by 10:35 AM IST.
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