- Indian Rupee (INR) falls after RBI meeting minutes
- The RBI diverged over rate cuts due to growth concerns
- US Dollar (USD) is rising against its major peers
- US services PMI jumped to 55.1 in June
The US Dollar Indian Rupee (USD/INR) exchange rate is rising for a fourth straight day The pair rose 0.03% in the previous session, settling on Thursday at 83.54. At 17:00 UTC, USD/INR trades +0.04% at 83.58 and is in a range of 83.68 to 83.23.
The Indian rupee is struggling against a stronger U.S. dollar as investors digested the Reserve Bank of India’s monetary policy meeting minutes, which were released on Friday.
The minutes showed that policymakers diverged further in their views on the need for higher interest rates to tame inflation, with some policymakers concerned that economic growth would be sacrificed.
The RBI’s 6 Monetary Policy Committee members voted earlier this month to keep the interest rate unchanged at 6.5% for an eighth straight month. However, two external members voted for a 25-basis-point rate cut and a change in the policy stance to neutral.
Based on average inflation in the fiscal year, the current rate is 2%, much higher than the neutral rate of 1%, which, according to policy maker Goyal, is ideal for the economy.
In May, retail inflation cooled to 4.75%, down from 4.83% in April, and core inflation hit a record low of 3.12%. Headline inflation is expected to average 4.5% this fiscal year, above the RBI target of 4%.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.2% at the time of writing at 105.80, after two days of losses. The USD is set to gain 0.24% across the week.
The US dollar is heading higher and is set to book gains across the week after stronger-than-expected US PMI data.
The S&P Global flash composite PMI, which is considered a good gauge for business activity, rose to 54.6 in May from 54.5 in May.
The manufacturing PMI was 51.7, up from 51.3 previously and stronger than the 51 expected.
Meanwhile, the services PMI was stronger than forecasts as well at 55.1, up from 53 spots 7 above estimates and pointing to an economy that’s both strong and resilient.
The PMI data signaled the fastest economic growth for over two years in June, pointing to an upbeat outlook for economic growth at the end of the second quarter. Although the strong inflation has cooled, the survey also brought welcome news in terms of job games with a renewed appetite to hire.
Attention will now turn to the US core PCE, the Fed’s preferred gauge for inflation, which is due next Friday.
