May 23, 2024
New Delhi, India
USDINR
The Indian Rupee traded on the back foot in Friday’s Asian session, weighed down by foreign capital outflows from domestic equities and a spike in global crude oil prices. Market sentiment was also influenced by India’s unexpectedly soft consumer inflation data, which has bolstered expectations of an extended rate-cutting cycle by the Reserve Bank of India (RBI).
Despite the downward pressure, a broader weakness in the US Dollar and optimism over progress in the India-US trade deal could help cushion the fall in the near term. According to Commerce and Industry Minister Piyush Goyal, the first phase of the multi-stage trade agreement between India and the US could be finalized before July.
Economic Indicators Paint Mixed Picture
India’s macroeconomic backdrop remains resilient. The HSBC India Manufacturing PMI inched higher to 58.3 in May, surpassing expectations of 58.0 and up from April’s 58.2. The Services PMI saw a more significant jump to 61.2 in April from 58.7 in March, lifting the Composite PMI to 61.2.
“India’s flash PMI indicates another month of strong economic performance. Growth in production and new orders among manufacturing firms remains robust, despite a marginal cooling from the rates of increase observed in April,” noted Pranjul Bhandari, Chief India Economist at HSBC.
On the global front, the US S&P Global Composite PMI rose to 52.1 in May’s flash estimate, up from 50.6 in April, indicating renewed momentum in economic activity. US jobless claims also surprised to the downside, with initial claims dropping to 227,000 against expectations of 230,000.
All Eyes on Fed Commentary
Traders are closely watching upcoming speeches from key US Federal Reserve officials—Alberto Musalem, Jeff Schmid, and Lisa Cook—for insights into the Fed’s rate outlook. The messaging could provide short-term cues for the dollar and, by extension, the rupee.
As it stands, the Indian currency remains under mild pressure, but global factors like a weakening greenback and improving trade ties may offer temporary relief going into next week.
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