- Indian Rupee (INR) falls after RBI keeps monetary policy unchanged
- Indian bond yields fell after the announcement
- US Dollar (USD) rises ahead of inflation data
- US CPI expected to rise to 7.3%
The US Dollar Indian Rupee (USD/INR) exchange rate is moving higher on Thursday for a third straight day. The pair settled +0.12 higher on Wednesday at 74.77. At 11:30 UTC, USD/INR trades +0.24% at 74.96.
The Reserve Bank of India voted to keep monetary policy on hold for another month. As expected, the central bank kept the lending rate at 4%. The RBI also left the reverse reop, a key borrowing rate at 3.35%, defying some analyst’s expectations of an increase.
The monetary policy committee (MPC) voted unanimously to keep the reop rate unchanged and voted 5-1 to stick with its accommodative policy to help the economy recover from the pandemic. RBI Governor Shaktikanta Das noted an improving inflation outlook but said that continued policy support was needed for a durable broad-based economic recovery in India.
India’s 10-year treasury bond yield fell following the announcement and the Rupee weakened.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.02% at the time of writing at 95.50 after losses yesterday.
The US is trading just mildly higher as investors wait cautiously for this week’s key release – the US inflation print. Inflation, as measured by the consumer price index is expected to rise to 7.3% year on year in January, an increase from December’s 7%. This would mark the highest level for inflation since 1982.
The Fed is broadly expected to hike interest rates by 25 basis points in March. However, following on from the strong January non-farm payroll, high inflation could prompt the Fed to hike rates at a faster, more aggressive pace, and kick start the process with a 50 basis point interest rate rise in March.
Jobless claims are also due to be released, but these will play second fiddle to inflation. Jobless claims are expected to fall to 230,00, down from 238,000 last week.
