- Indian Rupee (INR) drops sharply for second session
- India GDP +0.4% vs +0.5% exp.
- US Dollar (USD) rises elevated treasury yields
- US PCE inflation 1.5%
The US Dollar Indian Rupee (USD/INR) exchange rate has jumped higher on Friday, rising for a second straight session. The pair settled on Thursday at 72.73. At 15:15 UTC, USD/INR trades +1.4% at 73.79.
India’s economy grew by 0.4% year on year in the October – December quarter, pulling out of the pandemic inspired recession.
0.4% growth was slightly less than the 0.5% expansion that analysts were expecting which has dragged on the Indian Rupee. However it is still a marked improvement from the 23.6% and 7.5% contraction that was experienced in the April- June and July- September quarters respectively.
Private consumption is showing signs of improving even though it registered a contraction again in the October – December quarter. Consumption of durable goods also picked up following the removal of lockdown restrictions.
A sharp pick up in investment has also boosted the economy and this will be an important driver of growth going forwards.
The US Dollar is pushing firmly higher across the board. The US Dollar Index which measures the greenback versus 6 major peers trades +0.5% at 90.60 at the time of writing.
The greenback is extending its rebound from a 7 week low thanks to upbeat data and rising inflation expectations.
Personal income data rose 10% month on month in January, above forecasts. Meanwhile personal spending jumped 2.4% at the start of the year. Finally, the PCE figure, the Fed’s preferred measure of inflation hit 1.5% beating expectations of 1.4%
The upbeat data supported expectations that the US could see a solid economic recovery amid the rapid rollout of the covid vaccine and the Biden administration’s $1.9 trillion covid stimulus package. As strong recovery is expected to bring higher inflation and tighter monetary policy from the Fed.