• Indian Rupee (INR) falls ahead of tomorrow’s RBI meeting
  • Domestic equities rise, oil falls
  • US Dollar (USD) rises with Fed back in focus
  • US trade balance in focus

The US Dollar Indian Rupee (USD/INR) exchange rate is advancing on Tuesday, adding to yesterday’s gains. The pair settled+0.22% higher on Monday at 75.39. At 10:00 UTC, USD/INR trades +0.07% at 75.44.

The Indian Rupee trades lower as investors look ahead to the Reserve Bank of India monetary policy meeting tomorrow. The central bank is not expected to raise its key borrowing and lending rates and could adopt a cautious tone owing to the rapid spread of Omicron, preferring to adopt a wait and see approach until more is known about the highly mutated new COVID strain.

Separately domestic equities closed 1.5% higher as risk sentiment improved on easing Omicron worries.

Oil prices were acting as a drag on the Rupee as oil moved higher. West Texas Intermediate rallied 5% in the previous session as COVID fears eased and is trading a further 1% higher today. As Indian imports almost all of its oil, higher prices are a negative.

The US Dollar is trading higher across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.06% at the time of writing at 96.36, adding to gains from the previous session.

The US dollar rose in the previous session as fears over Omicron virus eased and investors increased bets that the US Federal Reserve would tighten monetary policy at a faster pace.

US medical advisor Dr Anthony Fauci calmed fears over the newly discovered Omicron COVID variant, noting that so far symptoms tend to be mild. Experts in Japan echoed Dr Fauci’s observation suggesting that those infected with Omicron suffer mild or no symptoms.

With Omicron concerns easing, the Fed and the timing of the first rate hike is back in focus. The US economic calendar is relatively light today with just trade data due.