Despite a Fall in Local Stocks and Rising US Yields, USD/INR Remains Stable

  • by THO
  • 2 weeks ago
  • news
  • 1

opened the day at 74.49 little changed from its previous day’s close. The rise in US yields and a moderate fall in local stocks maintained stability in the currency pair below the 74.60 level.

Asian stocks were buoyed after data showed China’s industrial production rose 3.5% exceeding expectations which eased concerns of slowing growth in asia’s biggest economy. Rupee’s rise beyond the 74 levels may be difficult to see as traders await fresh clues on the US economy after bringing forward bets for the US Federal Reserve interest rate hike on the back of a surge in inflation.

Local stocks ended higher on Monday, led by corporate earnings, major macroeconomic data and positive global clues. Goldman Sachs (NYSE:) has downgraded Indian equities by one notch, citing a record run this year that has made them the best performing emerging Asian market. On the back of ultra-easy monetary policy, raising vaccinations and the economic reopening, Indian stocks have rallied nearly 28% in 2021, compared with a 0.76% drop in the MSCI emerging market index.

One of the Federal Reserve Bank presidents said he expects higher inflation to continue over the next few months but warned against Central Bank overreaction as he maintained that inflationary factors will likely prove to be temporary. The dollar remained near 16-month highs as higher inflation brought forward Fed interest rate hike expectations.

DXY is currently trading at 95.42 after it touched a 16-month high of 95.60 on 15-11-21. After the latest US inflation data, expectations for earlier Federal Reserve interest rate hikes this year accelerated and markets now price a first rate hike by July 2022 and another by December 2022.

Oil prices fell on downgraded demand forecast from OPEC and the threat of further US intervention in the oil market. Oil prices are trading lower on speculation that US President Joe Biden’s administration might release oil from the US Strategic Petroleum Reserve to cool prices. OPEC Said in its monthly report that higher energy prices dampened the return of demand.

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