- Indian Rupee (INR) falls for a second day
- Domestic equities fall
- US Dollar (USD) rises versus its major peers
- FOMC 2-day meeting starts today
The US Dollar Indian Rupee (USD/INR) exchange rate is rising for a second straight day. The pair rose 0.02% in the previous session, settling on Monday at 82.90. At 10:00 UTC, USD/INR trades +0.16% at 83.03 and trades in a range of 82.92 to 83.05.
The Indian Rupee is struggling against the strength of the U.S. dollar and tracking domestic equities lower in jittery trade ahead of tomorrow’s FOMC rate decision.
The Nifty 50 fell 0.8% to 21,873, while the Sensex dropped 0.74% to 72,208 at the time of writing. US rate-sensitive IT stocks have been heavy fallers, dropping 3.3% this week on expectations that the Fed could adopt a more hawkish stance.
Strong foreign inflows helped the Indian stock market reach record highs in the latter part of last year, but that has slowly eased concerns about overheated valuations.
Elsewhere, dollar purchases from state-run banks have limited the Rupee’s ability to rise. Traders said that it’s difficult to determine whether these dollar purchases were on behalf of importers or the central bank.
RBI intervention is likely to continue contributing to the stability of the Rupee against the dollar.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +0.53% at the time of writing at 103.95, marking the fourth straight day of gains.
The US dollar is pushing higher ahead of the start of the Federal Reserve’s two-day monetary policy meeting, with the rate announcement due tomorrow.
The Fed is not expected to adjust interest rates; however, Federal Reserve Jerome Powell could adopt a more hawkish stance after two straight months of hotter-than-expected inflation data.
Heading toward the meeting, the market is pricing in a 55% probability of the Fed’s rate cut starting in June and a 75% probability of a rate cut in July.
Given that no interest rate change is expected this month, the focus will be on the Fed’s new projections, particularly the median dot plot, which in December signaled that the Fed was looking to cut rates three times this year. There is a rising expectation that this could be downwardly revised to two rate cuts this year in light of persistently sticky inflation.
