• Indian Rupee (INR) rises as spending is set to rise
  • GDP expected to slow to 8-8.5%
  • US Dollar (USD) falls for third straight day
  • US ISM manufacturing PMI

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Tuesday after steep losses in the previous session. The pair fell -0.7% yesterday, settling at 74.52 around the low of the day. At 10:30 UTC, USD/INR trades +0.4% at 74.82.

The Rupee is on the rise after the Indian government pledged to ramp up spending to 39.45 trillion rupees ($529.7 billion) in the coming fiscal year. The money is set to be used to build public infrastructure and drive economic growth in the country, as it continues to recover from the pandemic hit.

India’s economy contracted 6.6% in the previous fiscal year. However, the economic rebound continues since mobility restrictions were lifted in June.

Finance Minister Nirmala Sitharaman set of plans for spending 4.6% more in 2022/3. At the same time growth is expected to slow to 8% – 8.5% in same fiscal year, down from an estimated 9.2% this year.

The US Dollar is rising versus the Rupee but falling versus major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.2% at the time of writing at 96.36, marking the third straight day of declines.

The US Dollar continues to fall this week after surging across the previous week to a 19-month high. The greenback soared higher on expectations of an aggressive Federal Reserve, which could hike rates by 0.5% at the March meeting in order to tame runaway inflation.

Federal Reserve officials attempted to dampen down such expectations on Monday, suggesting that interest rates could lifted more slowly if the Fed reduced the balance sheet at a faster pace.

Looking ahead, attention will turn to the US economic calendar with the release of ISM manufacturing PMI. Expectations are for activity to slip to 57.5 in January, down from 58.7. This would still be a strong expansion, with the level 50 separating expansion from contraction