May 27, 2024
New Delhi, India
USDINR
The Indian Rupee (INR) held steady in Tuesday’s early European session, after clocking a two-week high in the previous trading day. A weaker US Dollar and strength in other Asian currencies, including the Chinese Yuan, lent mild support to the INR.
The recent drop in global crude oil prices also provides a tailwind for the Indian currency. As the world’s third-largest oil importer, India benefits from lower oil prices, which reduce its import bill and ease pressure on the rupee.
However, growing speculation around a potential 25-basis-point rate cut by the Reserve Bank of India (RBI) in June, as projected by a Moneycontrol poll, may limit further gains in the domestic currency. Lower interest rates typically reduce the appeal of a currency for foreign investors.
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Market Sentiment & Global Cues
Investor sentiment remains broadly positive for emerging market (EM) currencies. Brad Bechtel, Global Head of FX at Jefferies, noted, “It’s a very EM positive environment, and I don’t see any reason why that will stop in the near term.” He added that the US Dollar could face more downside if China allows the Yuan to appreciate further.
Meanwhile, NITI Aayog CEO BVR Subrahmanyam reaffirmed India’s economic ascent, stating that India has overtaken Japan to become the world’s fourth-largest economy, citing IMF data.
Key US Data in Focus
Markets are now awaiting several important US economic indicators. The Conference Board’s Consumer Confidence report, Durable Goods Orders, and the Dallas Fed Manufacturing Index are due later today. These will be followed by the Federal Open Market Committee (FOMC) minutes on Wednesday, which are expected to offer deeper insight into the US Fed’s future rate path.
Despite global rate cut discussions, the CME FedWatch Tool currently shows only a 5.6% probability of a US Federal Reserve rate cut at its June meeting, highlighting the divergence in rate expectations between the Fed and RBI.
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