USDINR Market Overview
The USDINR currency pair remains within a defined range, struggling to surpass the 83 level. Current market focus is on the impending US PCE inflation data, which could signal future Federal Reserve actions. Despite anticipations of multiple rate cuts next year, such expectations seem overly optimistic given the robust US economy. The fate of the Indian Rupee hinges on the actual implementation of a rate cut, as it continues to face depreciation pressures despite a recent easing following an unexpected FOMC meeting.
Rupee’s Weekly Performance
Despite a stronger close on Friday, the Indian Rupee experienced its largest weekly loss in over two months. The closing value was 83.14 against the US dollar, down from 83.2775 previously. The Rupee’s Friday gains were attributed to substantial dollar sales by large foreign banks, acting for custodian clients. However, the currency still weakened by 0.16% over the week, while the US dollar index showed signs of a potential weekly decline, influenced by the prospect of US interest rate cuts.
Economic Indicators and Currency Predictions
The US economy’s growth in the third quarter was lower than expected, at 4.9% versus a predicted 5.2%. This, coupled with a rebound in risk appetite, put pressure on the US dollar. The dollar index dipped to a four-month low in Asia. In the short term, the Rupee is expected to remain stable within the 83.05 to 83.35 range. Investors are now awaiting the US personal consumption expenditure (PCE) inflation data, which is anticipated to show a steady core PCE inflation rate.
Indian Stock Market and Bond Yields
The BSE Sensex and NSE Nifty indices both showed gains, primarily driven by the metals sector amid a weaker US dollar. The benchmark 10-year bond yield remained unchanged at 7.1884%, following the debt auction that increased supply.
Financial Instruments Performance
The Indian Rupee strengthened marginally against the US dollar. Government bond prices held steady, while the one-year and five-year overnight index swap rates both declined slightly. The call money rate and the overnight TREPS rate remained mostly unchanged, indicating a stable short-term lending market.