The USD/INR exchange rate continued to appreciate on Friday, trading around 83.60 during the early European session. The Indian Rupee (INR) has managed to avoid reaching an all-time low of 83.7190 against the US Dollar (USD), largely due to expectations of intervention by the Reserve Bank of India (RBI), according to market participants.
Factors Driving USD/INR Movement
The recent strength of the USD/INR pair can be attributed to the overall strengthening of the US Dollar amid heightened risk aversion in the markets. The Greenback’s gains are further supported by rising US Treasury yields. However, the upside potential for the USD may be limited by recent soft labor data, which has increased market expectations for a Federal Reserve (Fed) rate cut in September.
On Thursday, US Initial Jobless Claims rose more than anticipated, with 243,000 new unemployment benefit seekers for the week ending July 12, exceeding the expected 230,000 and surpassing the previous week’s revised figure of 223,000. This unexpected increase in jobless claims has heightened speculation about potential Fed policy adjustments.
Upcoming Data and Developments
In India, traders are closely watching for the release of the country’s FX Reserves data for the week ending July 8, scheduled for Friday. Additionally, attention is shifting towards the Union Budget for 2024-25, which will be presented to parliament next week.
Earlier this week, the International Monetary Fund (IMF) revised its economic growth forecast for India, now projecting a rate of 7% for this year, up from the 6.8% forecast in April. This upward adjustment is attributed to stronger consumer spending, particularly in rural areas.
Outlook
The USD/INR pair’s movements will likely continue to be influenced by both domestic and international developments. Market participants will be monitoring RBI actions, upcoming economic data, and global risk sentiment to gauge future trends in the exchange rate.
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