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INR bank notes
  • Indian Rupee (INR) traces equity markets higher
  • RBI foreign reserves decline
  • US Dollar (USD) slips as PCE inflation misses forecasts
  • US consumer confidence declines unexpectedly

The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower on Friday paring mild gains from the previous session. The pair settled +0.5% on Thursday at 74.18. At 14:40 UTC, USD/INR trades -0.05% lower at 74.11. The pair looks to end the week roughly where it started.

According to data from the Reserve Bank of India, India’s forex reserves declined by $4 billion to $603.93 billion. The decline was owing to a slide in gold assets. Reserves had surged by $3.074 billion to a record high of $608.081 billion in the previous week.

In the equities market, Indian stocks closed higher led by financials. Indians indices closed higher for a fifth time in six weeks as falling covid cases and rising vaccine numbers boosted confidence.

Oil prices continued rising, limiting any gains in the Rupee. Both WTI crude oil and brent settled on Thursday at the highest level since 2018.

The US Dollar is falling lower across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.23% at the time of writing at 91.60 paring minor gains from the previous session.

The US Dollar is falling after PCE inflation data. This is the Federal Reserve’s preferred measure of inflation. It showed that consumer prices rose sharply again in May and showed prices rising at the fastest annual pace since 2008.

PCE inflation rose 3.9% year on year in May, up from 3.6% in April. However this was marginally off the 4% forecast. Meanwhile core PCE came in at 0.5% month on month in May, down from 0.7% in April and below the 0.6% forecast. The slight easing in PCE data has helped calm concerns of runaway inflation.

Adding pressure to the US Dollar, consumer sentiment also came in softer than forecast. Michigan consumer sentiment unexpectedly fell to 85.5 in June down from 86.4. US data across the week has come in mildly weaker, dragging on the US Dollar.