- Indian Rupee (INR) rises as service sector activity surges
- RBI rate hike bets rise
- US Dollar (USD) looks to the Federal Reserve rate decision
- US ADP payrolls, ISM services data due
The US Dollar Indian Rupee (USD/INR) exchange rate is heading lower on Wednesday for a third straight session. The pair settled -0.19% lower on Tuesday at 74.69. At 10:00 UTC, USD/INR trades -0.27% at 74.49.
The Rupee is bounding higher following encouraging service sector data. Activity in India’s dominant service sector grew at its fastest pace in over a decade. Strong domestic demand boosted activity despite prices rising, prompting firms to hire staff at the fastest pace since the start of the pandemic.
India’s IHS Markit Services PMI rose to 58.4 in October, up from 55.2 in September. The level 50 separates expansion from contraction.
The data suggests that India’s economic recovery is well on track and could prompt the Reserve Bank of India to hike interest rates sooner.
The US Dollar is trading lower across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.05% at the time of writing at 94.04 paring strong gains from the previous session.
The US Dollar is looking towards the Federal Reserve monetary policy announcement later today. The Fed are widely expected to start tapering bond purchases. However, any commentary over inflation expectations or the timing of the first interest rate hike are more likely to drive movement in the greenback. Should the Fed push back on expectations of the first-rate hike expected in mid-2022 then the US Dollar could fall.
Prior to the Fed meeting there is plenty of data for investors to be digesting with ADP private payrolls and ISM non-manufacturing PMI expected to draw the most attention. The ADP release is expected to show 400,000 new jobs added in October, down from 568,000 in September. A strong print could bode well for Friday’s non farm payroll release.
