December 17, 2024
New Delhi, India
Rupee Slides on Global Cues
The Indian Rupee (INR) edged closer to a record low on Tuesday, pressured by a surge in US Treasury bond yields, weakness in the Chinese Yuan, and a widening trade deficit in November. The rupee’s depreciation reflects global economic challenges and domestic trade imbalances.
Key Influences on the Rupee
- Rising US Bond Yields: Strengthened the US Dollar, adding pressure on emerging market currencies, including the INR.
- Weaker Chinese Yuan: Contributed to a bearish sentiment across Asian currencies.
- Widening Trade Deficit: India’s merchandise trade deficit for November weighed heavily on the currency.
RBI Intervention to Stabilize Rupee
Despite these headwinds, significant rupee depreciation might be contained as the Reserve Bank of India (RBI) is expected to sell US Dollars through state-owned banks to avoid excessive volatility.
Economic Data Insights
- WPI Inflation: Declined to a three-month low of 1.89% in November, down from 2.36% in October, below market expectations.
- Manufacturing PMI: Rose to 57.4 in December, reflecting growth in production, new orders, and employment.
- Services PMI: Climbed to 60.8, indicating strong performance in the services sector.
- Composite PMI: Increased to 60.7, underscoring overall economic momentum.
Global PMI Comparison
- US Composite PMI: Improved to 56.6 in December, led by gains in services, which rose to 58.5.
- US Manufacturing PMI: Declined to 48.3, signaling contraction in the sector.
Focus Shifts to Fed Policy
Traders are eyeing the US Federal Reserve’s interest rate decision on Wednesday, along with Fed Chair Jerome Powell’s press conference and updated economic projections, for further market direction.
While global cues and a widening trade deficit pose challenges for the rupee, RBI’s potential intervention might help limit its losses. Investors remain cautious ahead of the Fed’s policy announcements.
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