Last week has been nothing short of a rollercoaster, with Dollar clinching the title of the strongest currency amidst considerable volatility. The narrative that dominated was the disappearing likelihood of a March rate cut by Fed. This unusual alignment of stock market exuberance with a strengthening Dollar raises questions about the sustainability of such a trend, considering their historically contrary movements.
A decline in U.S. bond yields and optimistic sentiment followed the release of India’s federal budget. The Indian rupee gained against the US dollar by more than 0.20% to 82.92 in the previous week.
Data previous week, ISM services PMI came in better than expected, suggesting continuing robustness of the economy. The recent labor and other data out of the US have been surprisingly resilient, adding to concerns of future inflationary pressures. It is very difficult for the FOMC to start a protracted rate cut cycle in this environment, without stoking fears of inflation in the future.
In general, the domestic currency has benefited from the interim budget 2024–25, particularly with regard to its emphasis on fiscal prudence. The government intends to reduce its fiscal deficit to 5.1% of GDP in FY25 from a downwardly revised 5.8% for the current fiscal year, as stated in the budget announcements.
Outlook
A decline in US bond yields and optimistic sentiment followed the release of India’s federal budget. Rupee gained against the US dollar by more than 0.20% to 82.92 in the previous week. In general, the domestic currency has benefited from the interim budget 2024–25, particularly with regard to its emphasis on fiscal prudence. The government intends to reduce its fiscal deficit to 5.1% of GDP in FY25 from a downwardly revised 5.8% for the current fiscal year, as stated in the budget announcements.
With rate cuts looking more and more uncertain in March, Dollar is well supported, and the Rupee might find it difficult to appreciate meaningfully. It seems we are set for more days of sideways trading in USDINR.
A decline in US bond yields and optimistic sentiment followed the release of India’s federal budget. Rupee gained against the US dollar by more than 0.20% to 82.92 in the previous week. In general, the domestic currency has benefited from the interim budget 2024–25, particularly with regard to its emphasis on fiscal prudence. The government intends to reduce its fiscal deficit to 5.1% of GDP in FY25 from a downwardly revised 5.8% for the current fiscal year, as stated in the budget announcements.
With rate cuts looking more and more uncertain in March, Dollar is well supported, and the Rupee might find it difficult to appreciate meaningfully. It seems we are set for more days of sideways trading in USDINR.