Indian Rupee’s Positive Start Amidst Global Factors
The Indian Rupee (INR) commenced the week on a positive note, gaining ground against the US Dollar (USD) on Monday. However, this optimism was soon dampened by various global factors that favored the Greenback. Speculations regarding the Federal Reserve’s stance on interest rate cuts, coupled with escalating tensions in the Middle East, bolstered the USD, thereby exerting pressure on the INR.
Fed’s Hawkish Tone Dampens Rupee’s Winning Streak
The three-day winning streak of the INR came to a halt as Federal Reserve (Fed) officials adopted a hawkish tone, leading investors to revise their expectations regarding interest rate cuts. This shift in sentiment favored the USD, further exacerbated by concerns over potential oil supply disruptions due to geopolitical tensions in the Middle East. These factors collectively contributed to the depreciation of the INR.
Focus on Indian PMI Data Amidst Global Economic Indicators
Investor attention turned towards the upcoming release of India’s HSBC Purchasing Managers Index (PMI) for April, scheduled for Tuesday. Simultaneously, global economic indicators, including the S&P Global PMI and the US GDP Annualized for the first quarter, are anticipated throughout the week. Additionally, the final reading of the US March Personal Consumption Expenditures Price Index (PCE) is awaited, with expectations of a rise in Core PCE inflation to 2.6% year-on-year.
Indian Rupee Weakens Against Headwinds
Despite initial gains, the INR faced headwinds, leading to a weakening trend. Notably, India’s foreign exchange reserves saw a significant contraction, declining by $5.4 billion to $643.16 billion for the week ending April 12, as reported by the Reserve Bank of India (RBI). RBI Governor Shaktikanta Das emphasized the robust growth in the Indian economy, supported by improvements in manufacturing and the investment cycle, as reasons to maintain interest rates.
Federal Reserve’s Policy Stance Influences Market Sentiment
The policy stance of the Federal Reserve remained a pivotal factor influencing market sentiment. Chicago Fed President Austan Goolsbee highlighted a “stalled” progress in inflation, suggesting that the current restrictive policy is appropriate. Similarly, Atlanta Fed President Raphael Bostic indicated that rate cuts are unlikely until the year’s end, further shaping expectations in the financial markets. These statements underscored the importance of central bank policies in navigating uncertainties and achieving inflation targets.