inr-bank-notes - INR
  • Indian Rupee (INR) shows resilience
  • RBI could start to raise repo rate in June
  • US Dollar (USD) rises on safe-haven flows
  • US durable goods orders and consumer confidence

The US Dollar Indian Rupee (USD/INR) exchange rate is edging falling on Tuesday after two days of gains. The pair settled +0.34% higher on Monday at 76.72. At 11:00 UTC, USD/INR trades -0.19% at 76.57.

The Rupee is showing resilience on Tuesday amid expectations of a more hawkish central bank. The Reserve Bank of India is expected to raise its repo rate in June and also raise interest rates at a faster pace than initially expected just a few weeks ago as inflationary pressures build.

Retail inflation jumped to almost 7% in March, above the 6% upper limit of the RBI’s target range and is expected to keep on rising owing to the spike in energy prices amid the fallout from the Russian war.

The RBI kept interest rates on hold in the April meeting at 4% a record low as it remained focused on supporting growth. The focus is set to change now to rein in surging inflation.

Falling oil prices also offer support to the Rupee as India imports over 80% of its oil requirements. West Texas Intermediate fell 3.5% yesterday and trades down a further 0.5% today.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.1% at the time of writing at 101.81, building on gains from yesterday and hitting a two-year high.

The US dollar rose yesterday on safe haven flows as concerns over rising COVID cases in China and the expected expansion of its lockdown restrictions to other districts hit risk sentiment hard yesterday boosting flows to safe havens such as the USD.

Today those concerns still linger offering some support to the USD. Attention will now shift to the economic calendar, with the release of US durable goods orders and consumer confidence set to influence the direction of the greenback.