- Indian Rupee (INR) falls to a fresh record low
- The RBI will announce its rate decision tomorrow
- US Dollar (USD) falls versus major peers
- US government could shut down at midnight local time
The US dollar-to-Indian rupee (USD/INR) exchange rate is rising for a second straight day. The pair rose 0.03% in the previous session, settling on Monday at 88.70. At 17:30 UTC, USD/INR trades 0.15% higher at 88.83 and trades in a range of 88.66 to 88.88.
The Indian Rupee is falling, dropping to a fresh record low on Tuesday. The decline comes as India’s central bank is set to announce its rate policy decision tomorrow and could keep rates steady at 5.5%.
However, there is still a possibility that the RBI will cut interest rates tomorrow despite ongoing weakness in the Rupee, as it looks to prioritise growth amid deteriorating trade relations with the US.
The Rupee fell to a fresh record low today and is among the worst-performing Asian currencies year to date, down 3.7% against the dollar.
This is relevant as a rate cut could also narrow interest rate differentials with the US, adding pressure on the currency.
The US Dollar is rising against the Rupee but falling against its major peers. The US Dollar Index, which measures the greenback against a basket of major currencies, is trading down 0.17% at 97.74, marking a third consecutive day of losses.
The US dollar is falling against its major pairs on Tuesday as investors fret over a possible U.S. government shutdown, which could disrupt the release of monthly jobs data later this week.
At midnight on Tuesday, local time equivalent to 0400 GMT, government funding will expire in the US unless the Republicans and Democrats agree to a last-minute interim deal.
The prospect of this shutdown is keeping the US dollar under pressure. The logic here is that a government shutdown could lead to a more dovish Federal Reserve.
If the shutdown is brief, the Fed will be able to ignore it; however, anything over 2 weeks increases the downside risk to growth and the job market, raising the chances of a more accommodative stance from the Federal Reserve.
The markets are pricing in 43 basis points’ worth of rate cuts this year, with a 25-basis-point reduction in October.
