- Indian Rupee (INR) snaps 4 day losing streak
- RBI keeps interest rates on hold, increases bond purchases
- US Dollar (USD) rises versus majors on Fed tapering bets
- US NFP expected to show 650k jobs
The US Dollar Indian Rupee (USD/INR) exchange rate is ticking a few pips lower on Friday snapping a four day winning run. The pair settled +0.12% higher on Thursday at 73.04. At 11:00 UTC, USD/INR trades -0.03% lower at 73.01.
The Reserve Bank of India kept interest rates on hold at record lows as expected. The central bank also announced additional bond purchases to support the economic recovery in India which stands at risk of being derailed by a fierce second wave of covid.
The Monetary Policy Committee at the RBI vote unanimously to keep its lending rate unchanged at 4% and keep the reverse repo or the borrowing rate at 3.35%.
The RBI also reassured that it will keep it monetary policy supportive for as long as necessary whilst downgrading its growth projections and saying that it expected any near term rise in inflation to be temporary.
The central bank is focused on growth over inflation. Whilst economic growth picked up in the January to March period compared to the previous three months, analysts are growing more negative over the June quarter following the huge second wave of covid which resulted in several lockdowns.
The US Dollar is trading lower versus the Rupee. However, it is heading higher versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.05% at the time of writing at 90.56 after hitting a three-week high.
A hattrick of strong data in the previous session boosted expectations that the Fed could look to tighten monetary policy sooner.
Attention will now turn to the US non-farm payroll report. Expectations are for 650,000 news jobs to have been created in May, up from last month’s disappointing 265,000. Unemployment is expected to tick low to 5.9%, down from 6.1%. A strong report could trigger high levels of volatility.