Prior to the publication of some key US reports, the Indian Rupee (INR) was in line to post its longest run of gains against its US counterpart since 2011.
With last week’s surprisingly dovish Federal Open Market Committee (FOMC) policy statement pushing back US interest rate hike expectations, the Rupee was able to advance on the ‘Greenback’ for seven consecutive sessions.
The Rupee’s uptrend against the US Dollar was supported at the beginning of this week as the Federal Reserve’s Vice Chairman, Stanley Fischer, intimated that the raising of US borrowing costs would not be a smooth, steady process.
As stated by one Mumbai-based industry expert; ‘Fischer’s comments have reinforced the Fed’s view that there’s no rush to raise interest rates. We don’t expect an increase before September, and any Fed action post that will be data dependent.’
However, with Tuesday’s US reports putting a summer rate hike from the Fed back on the table, the Rupee pared much of its gains against the US Dollar.
The US Consumer Price Index showed an increase in consumer prices, with the measure of non-core inflation improving from -0.1% year-on-year to 0.0% in February.
The nation’s core index climbed to 1.7% from 1.6% – moving closer to the Fed’s 2% target level.
Additional US Dollar strength was derived from the US Markit Manufacturing PMI, which moved further into expansion territory in March by increasing from 55.1 to 55.3.
During the European session the Indian Rupee declined by 0.6% against the US Dollar, with the USD/INR pairing achieving a high of 62.3990.
However, the Rupee gained by almost 1% against the Pound following the release of the UK’s own inflation data. The UK’s Consumer Price Index eased from 0.3% year-on-year in January to 0.0% in February – the first stagnant figure since records began at the end of the 1980’s.
Indian data is in short supply this week, with only the nation’s Foreign Reserves figures (due out on Friday) to be aware of.
There are several influential Indian reports on the cards for next week however, and Rupee movement could be occasioned by the nation’s Infrastructure Output ecostat (out on Tuesday) and India’s HSBC Manufacturing PMI for March, set for release on Thursday. The measure of the nation’s manufacturing sector is believed to have risen from 51.2 to 52.8, pushing further above the 50 mark separating growth from contraction.
Of course, developments in the US and any commodity price fluctuations will also have an impact on the Indian Rupee (INR) exchange rate.