inr-bank-notes - INR
  • Indian Rupee (INR) falls after gains yesterday
  • Still optimism over RBI’s ability to hike rates
  • US Dollar (USD) falls despite upbeat data
  • Federal Chair Powell to speak tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Thursday, paring losses from the previous session. The pair settled -0.08% lower on Wednesday at 79.78. At 18:00 UTC, USD/INR trades +0.11% at 79.88.

While the Rupee is falling some analysts are still optimistic regarding the outlook for the Indian economy. Some analysts consider that strong growth in India will give the Reserve Bank of India room to hike interest rates by another 0.6% in its fight against inflation.

India experienced economic growth of 16% year on year, according to most leading indicators. Moreover, GDP for FY 2022-23 is expected to be 7% year on year, this would make India one of the fastest growing economies in Asia.

Robust growth means that the RBI can prioritize its fight against inflation. Inflation has remained above the RBI’s upper tolerance limit for 7 consecutive months. The RBI has already hiked rates by 140 basis points and are expected to keep hiking.

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 -0.19% at the time of writing at 108.46 after steep losses yesterday.

The USD trades modestly lower after investors digest the latest macroeconomic figures and look ahead to the start of the Federal Reserve’s annual Jackson Hole Symposium.

Data showed that the US economy contracted a less than expected -0.6%, down from the initial reading of -0.9%. Whilst this is an improvement, the data confirms that the US economy is in a technical recession which is two consecutive contracting quarters.

Initial jobless claims were also stronger than forecast, rising by 243k, down from 250k in the previous week and less than the 253,000 forecast.

Looking ahead now the focus is firmly on the Jackson Hole Symposium and what Jerome Powell says regarding the outlook for monetary policy. A more hawkish tone from the Federal Reserve could send the USD higher. However, should the Fed adopt a less hawkish stance then the USD could ease lower.