During the early European trading session on Thursday, the USD/INR pair exhibits a slight uptick, nearing the 83.50 mark. The upward movement is attributed to a corrective phase in the US Dollar (USD), aiding in retracing recent losses incurred over the past two days. However, the Greenback witnessed a depreciation on Wednesday amid mounting expectations of multiple rate cuts by the Federal Reserve (Fed) in 2024.
The dovish sentiment surrounding the Fed gained traction following the release of lower-than-anticipated monthly Consumer Price Index (CPI) and Retail Sales data from the United States (US). US CPI decelerated to 0.3% month-over-month in April, falling short of expectations, while Retail Sales remained stagnant, failing to meet the projected increase of 0.4%.
The US Dollar Index (DXY), measuring the USD against six major currencies, hovers around 104.30, buoyed by improved US Treasury yields. At present, the 2-year and 10-year yields on US Treasury bonds stand at 4.73% and 4.33%, respectively.
In India, data released by the Ministry of Commerce and Industry revealed an increase in Trade Deficit to $19.1 billion in April, up from the previous reading of $15.6 billion. This surge can be attributed to a decline in exports and a notable rise in Gold imports, as per government statistics.
A foreign exchange trader at a private bank, cited by Reuters, anticipates a modest strengthening of the Indian National Rupee (INR) but cautions against significant movements, citing INR’s underperformance amidst broad USD short positions buildup. Forward premiums on the USD/INR pair have observed an uptick, with the one-year implied yield climbing by 2 basis points to 1.70%, supported by lower US bond yields.
