September 17, 2024
New Delhi, India
Rupee Analysis
The Indian Rupee (INR) weakened in Tuesday’s Asian session, ending a three-day winning streak as strong US Dollar (USD) demand from local importers, especially oil companies, pressured the currency. With India being the world’s third-largest oil consumer, the recent rebound in crude oil prices also limited the INR’s upside.
Key Factors Influencing INR Movement:
- USD Demand: Renewed demand for the US Dollar from local importers, particularly oil firms, exerted downward pressure on the INR.
- Crude Oil Prices: Rising oil prices, a key factor given India’s heavy reliance on oil imports, further contributed to the rupee’s decline.
- Fed Rate Cut Expectations: Despite the rupee’s slide, expectations of a jumbo Federal Reserve rate cut may cap its downside, as market participants anticipate a potential 50 basis point (bps) cut, up from earlier expectations of 25 bps.
- Foreign Fund Inflows: Significant foreign investment in Indian equities continues to offer some support to the local currency.
Key Data to Watch:
- Indian WPI Inflation: Investors will be closely watching India’s Wholesale Price Index (WPI) Inflation for August, which is expected to ease to 1.80% YoY from 2.04% in July.
- US Retail Sales: The US Retail Sales report is due later on Tuesday and is forecasted to rise 0.2% MoM in August, following a 1.0% increase in July.
Broader Economic Context:
- India’s Economic Growth: According to RBI Governor Shaktikanta Das, India’s economy is projected to grow at around 7.5% or more, surpassing the RBI’s forecast of 7.2% for the current financial year.
- US Manufacturing Index: The NY Empire State Manufacturing Index improved to 11.5 in September from -4.7 in August, beating expectations of a 3.9% decrease.
With global market dynamics and key economic data releases in focus, the Rupee may experience further volatility, though the potential for a larger US Fed rate cut and continued foreign inflows could provide some cushion against significant losses.
Disclaimer:
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