indian-rupee-bank-notes - INR
  • Indian Rupee (INR) under pressure as covid cases continue to rise
  • Goldman Sachs down grades GDP outlook for India
  • US Dollar (USD) trades flat versus major peers
  • FOMC minutes up next

The US Dollar Indian Rupee (USD/INR) exchange rate is surging higher on Wednesday extending gains for a second straight session.  The pair settled +0.2% on Tuesday at 73.48. At 14:30 UTC, USD/INR trades +1.3% at 74.05 a 4 month high.

The Reserve Bank of India left key interest rates unchanged, as expected, despite another rise in inflation last month to over 5%.

The Indian central bank kept the repo rate at 4% and held the reverse repo rate (the borrowing rate) unchanged at 3.35%.

The RBI did shave its cash reserve ratio. This is a move which is associated to a modest easing of monetary policy.

Meanwhile, the number of new daily covid infections in India continues surge. India recorded 115,736 new covid cases on Wednesday a new record.

The IMF projects that India will see economic growth of 12.5% in 2021. This would be stronger than economic growth in China. However, investment bank Goldman Sachs is more concerned over the impact of this latest resurgence in covid cases on the economy. Goldman Sachs has lowered its GDP forecast for the April – June quarter.

Goldman Sachs now forecasts growth for the quarter to be 31.3% yoy, down from 33.4%.

The US Dollar is gaining versus the Rupee. However, it is trading flat versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades at 92.30 at the time of writing.

The US Dollar is trading in a muted manner ahead of the release of the FOMC minutes later today. The minutes are from the FOMC meeting in March. Investors will be scrutinising the minutes for clues as to what policy makers make of rising inflation expectations. Any sense that the Fed could be turning slightly more hawkish amid the strong vaccine rollout and impressive labour market data could send the US Dollar higher.