inr-bank-notes - INR
  • Indian Rupee (INR) rises after an outsized hike by the RBA
  • A surprise 0.5% rate hike by the RBA unnerved the market
  • US Dollar (USD) edges lower in quiet trade
  • US trade balance narrows sharply

The US Dollar Indian Rupee (USD/INR) exchange rate edged lower on Tuesday after two days of gains. The pair settled +0.30% higher on Monday at 77.82. At 15:00 UTC, USD/INR trades -0.18% at 77.68.

The Indian Rupee is rising despite weakness in domestic equities. Indian shares are falling for a third session after a surprisingly large interest rate hike in Australia deepened concerns around aggressive monetary policy ahead of the Reserve Bank of India’s monetary policy meeting tomorrow.

The RBA hikes rates by 50 basis points. Ahead of the 25 basis points that the market expected, raising fears of a recession.

The Nifty 50 closed 0.9% lower at 16416 and the Sensex fell 1% to 55107.

The World Bank downwardly revised its global growth forecast to 2.9%, down from the 4.1% forecast in January.

The US Dollar is falling across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades -0.03% at the time of writing at 102.45, after solid gains yesterday.

The US Dollar pushed higher yesterday as it traced treasury yields higher. The 10-year bond yield rose above the critical 3% mark, rising to a 4-week high amid rising inflation fears and hawkish Fed bets.

On the data front, the US trade deficit narrowed sharply in April as imports increased and exports declined. Exports rose 3.5% to $252.6 billion, and imports fell 3.4% to $339.7 billion.

Today the US dollar is trading quietly. There is no more economic data today and there are no Federal Reserve speakers ahead of next week’s FOMC interest rate decision.

The key data piece this week will be the inflation data, as measured by the consumer price index. Expectations are for inflation to stay at 8.3% year on year in May, in line with April. However, core inflation is expected to tick lower to 5.9%, which will mark the third straight month of declines.