USD/INR trades on a positive note, investors await Fed rate decision

  • Indian Rupee loses traction on Tuesday amid a stronger USD. 
  • Fed is expected to hold rates steady in the range of 5.25%–5.50% at its March meeting.
  • The US Fed interest rate decision on Wednesday will be the highlight of this week. 

Indian Rupee (INR) weakens on Tuesday on US Dollar (USD) purchases by state-run banks. The lower speculation that the US Federal Reserve (Fed) may cut interest rates in June provides some support to the Greenback and lifts the USD/INR pair. The Fed is widely anticipated to hold rates steady for a fifth straight time at its March meeting on Wednesday and maintain a data approach to ensure inflation returns sustainably to its 2% target. Nonetheless, there is still a possibility that Fed officials might reduce the number of rate cuts to two from the three rate cuts they expected earlier this year. 

Looking ahead, the US February Building Permits and Housing Starts are due on Tuesday. Investors will closely watch the US Fed interest rate decision on Wednesday and take more cues about the future trajectory of interest rates from Fed Chair Jerome Powell during the press conference. On Thursday, India’s S&P Global Manufacturing and Services PMI will be released. 

Daily Digest Market Movers: Indian Rupee remains vulnerable amid global uncertainties

  • Foreign investors purchased bonds worth about 100 billion Rupees ($1.21 billion) on a net basis in March, bringing the total net purchase to more than 375 billion Rupees in the first two months of 2024.
  • Foreign portfolio investors increased their holdings of Indian government bonds by roughly 50% since the index inclusion news less than six months ago.
  • India’s foreign exchange climbed from $6.55 billion to $625.63 billion in just two years, while Indian gold reserves rose from $569 million in 2021 to $48.4 billion this week in March 2024, according to the Reserve Bank of India (RBI).  
  • The Fed Chair Jerome Powell said earlier this month that the US central bank might cut its benchmark interest rate later this year, even though the continued progress on lowering inflation to the target “is not assured.”
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