January 13, 2025
New Delhi, India
USDINR Analysis
The Indian Rupee (INR) weakened significantly in Monday’s Asian session, nearing a fresh all-time low of Rs. 86.3 per US Dollar. Market sentiment turned negative following robust U.S. employment data and hawkish remarks from Federal Reserve officials, reinforcing expectations of a slower-than-expected rate-cut cycle in 2025.
Key Highlights:
- US Economic Data Impact:
- U.S. Nonfarm Payrolls (NFP) surged by 256,000 in December, exceeding the forecast of 160,000.
- The U.S. unemployment rate dipped to 4.1% in December from 4.2%, while average hourly earnings edged lower to 3.9% from 4.0%.
- A strong labor market has bolstered the U.S. Dollar (USD), exerting downward pressure on the Rupee.
- Global and Domestic Factors:
- Hawkish commentary from Fed officials, including concerns over inflation sticking between 2.5% and 3%, dampened investor sentiment.
- Rising crude oil prices, a major cost for India as the world’s third-largest oil consumer, added to INR’s woes.
- Foreign portfolio investors sold heavily in domestic equities, intensifying selling pressure on the currency.
RBI Interventions and CPI Focus:
The Reserve Bank of India (RBI) intervened in forex markets by offering U.S. Dollars to limit INR’s losses. Analysts suggest the central bank’s interventions have prevented a steeper decline.
Later today, traders will closely monitor India’s Consumer Price Index (CPI) inflation data for December, expected to rise 5.3% year-over-year. This data is critical for assessing the outlook on domestic monetary policy.
Closure:
While the INR’s losses were curtailed by RBI’s timely interventions, the combination of stronger USD, elevated crude prices, and foreign outflows pose significant risks. All eyes remain on the December CPI data for further market cues.
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