• Indian Rupee (INR) rallied after OECD raised India’s GDP forecast
  • FY 22 India now expected to grow by 12.6%
  • US Dollar (USD) rises ahead of CPI data
  • US bond auction to be closely watched

The US Dollar Indian Rupee (USD/INR) exchange rate is trending northwards on Wednesday, paring losses from the previous session. The pair settled -0.8% on Tuesday at 72.76. At 11:15 UTC, USD/INR trades +0.33% at 73.00.

The Indian Rupee surged in the previous session thanks in part to the Organisation for Economic Co-operation and Development (OECD) upwardly revising its growth forecasts for India. The OECD now predicts that the Indian economy will rebound sharply in FY22 by 12.6%. This would make it the fastest growing economy in the world.

The OEDC highlighted that growth continued in the October – December quarter of 2020 despite new covid outbreaks.

The OECD now expects India’s GDP to contract in FY21 by 7.4% compared to a contraction of 9.9% previously.

The US Dollar is trending higher across the board. The US Dollar Index which gauges the greenback versus 6 major peers trades +0.1% over 92.00 at the time of writing.

The US Dollar is recovering from steep losses on Tuesday as US bond yields stabilized after falling from a yearly peak.

US yields have been under the spotlight recently and a key driving factor for the markets as inflation expectations increase. A combination of an accelerating covid vaccine rollout, reopening of the US economy and  $1.9 trillion covid stimulus package mean that the US economy is now forecast to recover more quickly.

Attention now turns to the release of US inflation data, measured by the consumer price index (CPI). Economists forecast CPI to rise 0.4% month on month in February, up from 0.3% the month before. Annually a rise to 1.7% is forecast, up from 1.4%. A strong reading for inflation could boost speculation of an earlier move by the Fed to tighten policy.

Later in the session the US 10 year note auction will also be under the spotlight. Any signs of weak participation could lift treasury yields northwards and boost the US Dollar.