- Indian Rupee (INR) rises in risk on trade on vaccine optimism
- Indian economy expected to recover more quickly
- US Dollar (USD) extends losses on risk outflows, amid US political clarity
- US data deluge awaited for further cues
The US Dollar Indian Rupee (USD/INR) exchange rate is extending losses for a second straight session on Wednesday. The pair settled -0.25% lower on Tuesday at 74.08. At 12:15 UTC, USD/INR trades -0.2% at 73.93, at the lower end of the daily traded range.
Riskier assets and currencies such as the Indian Rupee are being lifted by an upbeat mood in the market. Vaccine optimism continues to drive the financial markets as covid cases worldwide near 60 million, although there are signs of the rally starting to run out of steam. Whilst FX markets ae still displaying risk on trade signs, the rally in the stock market has stalled.
The Indian economy is expected to recover early next year from the pandemic recession, albeit at a modest pace, according to a poll of economists by Rueters. Those quizzed upgraded their growth predictions for India based on vaccine developments.
Of the 50 economists polled the broad expectation is that the economy would contract -8.8% in July – September quarter and 3% in October – December quarter. The economy is expected to return to growth in January – March quarter.
The US Dollar is trending lower across the board in risk off trade. As risk appetite rises, demand for the safe haven US Dollar has fallen.
In addition to upbeat vaccine developments, improving clarity over the US political picture is lifting sentiment. Outgoing President Trump’s administration has started to cooperate with the transition to a Joe Biden Presidency and administration. Furthermore, reports that ex-Federal Reserve Chair Janet Yellen could be the next US Treasury Secretary are being well received, given that Janet Yellen is considered a market friendly choice.
Looking ahead there is a stream of US data due to be released, including US Q3 GDP, initial jobless claims, followed by consumer confidence and the minutes from the latest FOMC meeting ahead of the Thanksgiving holiday.