September 9, 2024
New Delhi, India
USDINR Today
The Indian Rupee (INR) extended its gains against the US Dollar (USD) for the second consecutive session on Monday, supported by expectations of Reserve Bank of India (RBI) interventions and reduced odds of an aggressive interest rate cut by the Federal Reserve (Fed) in September. However, the USD/INR pair may face appreciation pressure due to concerns over a potential slowdown in the US economy and broader declines in Asian equities and currencies.
Key Market Influences:
- RBI Interventions: Last week, the RBI likely intervened multiple times to support the Indian Rupee. Traders expect the RBI to continue intervening to prevent the INR from falling below the crucial 84.00 mark. Rising oil prices could also pressure the INR, as India is the world’s third-largest oil consumer and importer.
- US Dollar Stability: The US Dollar remained stable as recent US labor data reduced the likelihood of an aggressive Fed rate cut in September. The US Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s revised figure of 89,000. The CME FedWatch Tool indicates a 29.0% probability of a 50 basis point rate cut at the Fed’s September meeting, down from 30.0% a week earlier.
Economic Indicators and Forecasts:
- FX Reserves Surge: India’s foreign exchange reserves reached a record high of $683.99 billion as of August 30, up from $681.69 billion previously. This surge is attributed to a substantial influx of foreign capital, driven by robust economic growth and the anticipated inclusion of Indian assets in JPMorgan’s emerging market debt index.
- Positive Economic Data: The Composite PMI for India continued to show strong growth in August, driven by accelerated business activity in the service sector, marking its fastest expansion since March. The World Bank raised India’s growth forecast for FY25 to 7%, up from 6.6%.
- US Labor Market Updates: The ADP Employment Change report showed an increase of 99,000 private-sector jobs in August, below the estimated 145,000. Meanwhile, the US JOLTS Job Openings fell to 7.673 million in July, the lowest since January 2021, missing market expectations.
Market Outlook:
The USDINR pair’s downside may be limited as the US Dollar finds support from a more cautious outlook on rate cuts by the Federal Reserve. Additionally, any unexpected economic data or shifts in market sentiment could trigger further volatility in the currency markets.
Disclaimer:
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