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INR bank notes
  • Indian Rupee (INR) strengthens for third straight day
  • Rupee boosted by huge inflows in Indian stock markets
  • US Dollar (USD) declines, US treasury yields rise
  • Fed Chair Jerome Powell due to testify tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower for a third straight day on Monday. The pair settled -0.3% on Friday at 72.58. At 15:15 UTC, USD/INR trades -0.10% at 72.48.

The Rupee slipped to a fresh 11 month low during the Asian session on Monday and continues to trade around these levels thanks to huge inflows into the nations stock markets.

The Rupee was one of the weakest Asian currencies last year, it is among the best performers this year, up 0.6% versus the US Dollar so far this year.

With the economy recovering and the government having recently announced an expansive budget investor have bought up almost $4 billion of stocks this month alone. This is the most in Asia’s emerging markets after China.

Analysts suggest that the technical outlook for the Rupee is upbeat with USD/INR expected to advance to 72 by the fourth quarter of this year.

The latest economic growth figures are due on Friday. Economists expect data to show that India pulled out of recession in Q4 with 0.5% year on year growth in the final three months of the year.

The US Dollar is falling lower across the board. The US Dollar Index, which measures the greenback versus a basket of currencies trades -0.2% at the time of writing.

The US treasury bond yield is on the rise, hitting a fresh yearly high triggering a sell off in stocks. The yields paid on 10 year government debt reached 1.294% on Monday as investors fret over rising inflation down the road.

Interestingly the US Dollar was unable to hold onto earlier gains and has fallen lower.

Attention will turn to Federal Reserve Chair Jerome Powell who is due to give a bi-annual testimony before Congress on Tuesday and Wednesday. Fed Powell has the challenging task of sounding upbeat about the US economic recovery whilst keeping expectations for tapering support reined in.

Investors will also be watching for any updates on the progress of the Biden administration’s $1.9 trillion stimulus package through Congress. It is expected to be voted on in the House of representatives on Friday.