usd-inr-bank-notes

The US dollar is down against the Indian rupee on Tuesday, the second day of US President Trump’s 36-hour visit to India.

USD/INR was lower by 20 pips (-0.29%) to 71.84 with a daily range of 71.77 to 71.92 as of 10am GMT.

USD/INR erased its daily gains late on Monday and has been little changes around the 71.85 level on Tuesday. The exchange rate has barely moved on a weekly basis, down just -0.03%.

The rupee

The rupee has proven somewhat immune to the turbulence across global stock and FX markets, partly owing to weak oil prices which benefit India as a net-importer of oil and because the rising inflation in India makes further rate cuts more difficult than in the United States. In India retail inflation now stands at 7.59%, whereas with US inflation (using its preferred measure) at 1.5%, the Fed has ‘room’ to cut rate rates if needed without much risk of causing a spike in inflation.

Reserve Bank of India (RBI) Governor Shaktikanta Das said on Monday that he was “wary of inflation, but there is further space for rate cuts.” The RBI already cut interest rates five times in 2019 as India’s economy slowed down at a faster pace than many had anticipated. The sharp growth slowdown in India was the main driver for the lowered IMF global growth forecasts in January.

The dollar

Markets will also be wary of pushing the rupee in one direction or the other during US President Donald Trump’s visit, which could unleash a wave of good or bad news for trade between the two countries. Day one was largely a celebration with Trump speaking to a 10,000 strong rally while Day two has been more about business.

Prime Minister Modi sounded optimistic saying that US-India relations were the “most important partnership of the 21st Century.” And that new partnerships on defence would “enhance India’s defence capabilities”. President Trump matched the positive tone, saying “tremendous progress” has been made toward a US-India trade deal, calling the brief visit “very productive”.


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