- Indian Rupee (INR) falls to a record low
- Current account deficit expected to widen to 3.2% GDP
- US Dollar (USD) rises on hawkish Fed bets & recession fears
- US ISM services PMI, FOMC minutes
The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Wednesday after strong gains in the previous session. The pair settled +0.46% higher on Tuesday at 79.27. At 11:00 UTC, USD/INR trades +0.09% at 79.34.
The Indian Rupee fell to a record low on Tuesday amid rising concerns over the current account deficit and the trade deficit hit an all-time high in June. Data showed that India’s trade deficit widened to a record high of $25.63 billion owing to a rise in crude oil and coal imports, up from $9.61 billion a year earlier.
The current account deficit is expected to widen to 3.2% of GDP in 2023, which would be up considerably from 1.2% in 2022.
Indian stocks also fell closing Tuesday 0.2% lower. Foreign portfolio outflows in June were $6.6 billion, its highest level since March 2020 when the pandemic hit.
Today the Rupee continues to fall despite a rebound in equities and the steep fall in oil prices. Oil tumbled almost 10% yesterday as recession fears hurt the demand outlook.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.03% at the time of writing at 106.56 after rising 1.3% yesterday and hitting a 20 year high.
The USD surged yesterday on bets that the Federal Reserve would raise interest rates more aggressively to tame inflation and on safe-haven flows as recession fears escalated.
Today the USD looks toward service sector data with the release of ISM services PMI, which is expected to slow slightly to 54.5, down from 55.9 in May.
The minutes of the latest Fed meeting are also due to be released and could provide clues as to the likelihood of the Federal Reserve raising interest rates by 75 basis points in the July meeting, as oppose to 50 basis points.