The Indian Rupee (INR) regained its footing on Thursday, buoyed by anticipation of significant foreign inflows. This optimism stems from Indian bonds being slated for inclusion in the JP Morgan Emerging Market (EM) Bond Index on June 28. According to Business Standard, foreign investors have already funneled approximately $10 billion into securities poised to join the index. Goldman Sachs projects at least $30 billion more in inflows in the coming months, as India’s weighting in the index gradually climbs to 10%.
Conversely, the US Dollar (USD) lost ground amid trader expectations for Friday’s Core PCE Price Index inflation data, predicted to decrease year-over-year to 2.6% from the prior 2.8%. This indicator, favored by the Federal Reserve (Fed) for gauging inflation, is pivotal. Market participants hope that easing inflation will prompt the Fed to contemplate rate cuts sooner rather than later.
Daily Digest Market Movers:
The Indian Rupee’s gains are also supported by lower crude oil prices. As one of the world’s top oil consumers, India benefits from West Texas Intermediate (WTI) crude oil prices dipping to near $80.30. The decline follows a surprise increase in US crude stockpiles, sparking concerns about diminishing demand from major oil consumers.
Fed Governor Michelle Bowman reiterated on Tuesday that maintaining a steady policy rate for a time should suffice to control inflation. Meanwhile, Fed Governor Lisa Cook suggested interest rate cuts could be appropriate “at some point,” noting progress on inflation and a gradual cooling of the labor market, though she remained non-committal on timing.
S&P Global Ratings maintained its growth forecast for India at 6.8% for FY25, attributing this to high interest rates and government spending bolstering demand in non-agricultural sectors. Additionally, RBI Governor Shaktikanta Das projected India is on the cusp of a major structural growth shift, targeting sustained 8% GDP growth, driven by reforms like the Goods and Services Tax (GST), as reported by The Economic Times.
India is projected to become a $4 trillion economy by 2025, overtaking Japan early in the next fiscal year to become the world’s fourth-largest economy, according to Sanjeev Sanyal of the Indian Economic Advisory Council to the Prime Minister (EAC-PM).
Technical Analysis: USD/INR Around 83.50
The USD/INR pair trades near 83.50 on Thursday, with the daily chart revealing a broadening pattern, indicative of rising volatility and suggesting a potential correction before further decline. The 14-day Relative Strength Index (RSI) hovers slightly above the 50 level, with a break below signaling a bearish trend.
Immediate support is noted at the 50-day Exponential Moving Average (EMA) at 83.40. A break below this could push the USD/INR towards the lower boundary of the broadening bottom at around 83.30. On the upside, resistance is expected at the upper boundary of the broadening formation near 83.70, followed by the psychological level of 84.00.
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