• Indian Rupee (INR) tracks yuan lower
  • Domestic equities rise to a monthly high
  • US Dollar (USD) rises as the debt ceiling deal goes to Congress
  • US consumer confidence data due

The US Dollar Indian Rupee (USD/INR) exchange rate is rising for a third straight day. The pair rose 0.01% yesterday, settling on Monday at 82.58. At 10:30 UTC, USD/INR trades +0.2% at 82.74 and trades in a range of 82.55 to 82.78.

The Indian Rupee trades lower despite domestic equities rising to a 5-month high on an improved market mood.

Instead, the Rupee is tracking the Chinese yuan lower, along with other Asian currencies. The Yuan has fallen below the 7.10 level against the USD for the first time since November last year, amid a weakening economic recovery and a hawkish outlook from the Fed.

The Rupee trades down around 1% across the month, its worst monthly performance since December. Meanwhile, the USD is up around 2.5% versus its major peers in May.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.05% at the time of writing at 104.25, after booking gains of 0.04% in the previous session.

The USD is rising as investors digest the latest U.S. debt ceiling developments, weigh up more hawkish fed expectations U.S. consumer confidence data.

President Biden and House Speaker Kevin McCarthy have reached a deal to lift the$31.4 trillion debt ceiling. However, the deal now needs to make it through the mic Congress which could prove to be problematic. The Republicans control the House, while the Democrats control the Senate. Hardline Republicans have already said that they will oppose the deal.

Meanwhile, expectations are rising that the Federal Reserve will raise interest rates in the June meeting. The market is now pricing in a 60% probability of a 25 basis point rate hike in June. This is up from last week after US core PCE unexpectedly rose to 4.7% YoY in April, up from 4.6%.

Looking ahead, in addition to the passage of the debt ceiling deal through Congress, investors will also be looking to US consumer confidence data.