- Indian Rupee (INR) extends losses as covid cases continue to soar
- Gem and jewellery exports plunge -38% in July
- No signs of additional us stimulus is hurting demand for the US Dollar (USD)
- US initial jobless claims in focus
The US Dollar Indian Rupee (USD/INR) exchange rate is inching higher, extending gains from the previous session. The pair settled on Wednesday +0.24% at 74.79. At 10:45 UTC USD/INR trades +0.04% at 74.82 as it trades within a familiar range.
The Rupee remains under pressure as the number of new daily coronavirus cases continues to surge. New infections grew by 67,000 on Thursday, taking the total to 2.4 million to date. From 1st August -8th August India reported 399,263 cases compared to 384,099 cases being reported in the US. This was the first time that India eclipsed the US trajectory of weekly cases.
The sharp rise in cases in India is impacting demand. The International Monetary Fund (IMF) expects India’s GDP to contract -4.5% as the coronavirus pandemic stalls activities in the economy.
Elsewhere, it was reported that India’s gem and jewellery exports dropped -38% in July compared to a year earlier to $1.36 billion. Whilst cut and polished diamond exports plunged 39% year on year. The industry was hit no only by falling international demand but also by labour shortages caused by the national lockdown.
The US Dollar is trading higher versus the Rupee but lower against its major peers amid the delay in Congress agreeing additional stimulus for the US economy.
Negotiations between Republicans and Democrats in Congress remain deadlocked. However, with 16 million Americans jobless and after supplementary federal unemployment benefits expired last month the need for an agreement is acute. Concerns are quickly growing that the US economic recovery will stumble without additional fiscal support. Market participants fear that the longer that the deadlock continues in Congress, the more damage that the US economy will experience.
Investors will now look towards jobless claims data. Expectations are for initial jobless claims to edge down to 1.12 million. This would be the lowest level since the pandemic started. However, it would only be a slight decline from last week’s 1.18 million, suggesting that the recovery in the labour market is slowing.