The Indian Rupee made gains against several peers on Tuesday as the currency took advantage of a weakened US Dollar.
Earlier in the session, the Indian Rupee was under pressure against the US Dollar and Pound Sterling as speculation increased that the Federal Reserve will raise interest rates following the release of positive US economic data on Monday. The US Dollar advanced after data showed that US factory orders rose for the first time in eight months. According to the US Census Bureau, factory orders increased by a seasonally adjusted 2.1% in March, the figure beat expectations for a gain of 2%. The rise was the biggest seen since July.
As the session progressed, the Indian Rupee managed to advance as a report released by the Washington based Commerce Department showed that the USA’s trade deficit widened to the highest level in more than six years in March. The trade gap increased by 43.1%, the largest increase seen in 18 years, to $51.4 billion. The previous month’s deficit was $35.89 billion and well above economist expectations for a figure of $41.2 billion.
Imports were shown to have surged by 7.7% to a record high of $239.2 billion in March. Imports of food and capital and consumer goods were the highest on record. Imports of industrial supplies and materials were the lowest on record. Exports, meanwhile, were shown to have increased by 0.9% to $187.8 billion in March.
Also putting pressure upon the US Dollar was a report released by Markit, which showed that the pace of expansion in the US service sector eased from its best level in seven-months in April as new business growth fell. According to Markit, its Services Purchasing Managers Index (PMI) softened from the 59.2 seen in March to 57.4 in April. The Composite PMI, which combines manufacturing and service sector activity, also declined from 59.2 to 57.0.
Further gains for the Indian Rupee were held in check as the session progressed and another report out of the US beat economist expectations, causing investors to maintain their bets that the US economy is still on track to improve in the second quarter.
The Institute for Supply Management (ISM) PMI for services showed that the pace of growth in the US services sector rose to a five-month high in April. The PMI rose to 57.8 last month from the 56.5 seen in March. Economists had been expecting a reading of 56.2.
The Indian Rupee could receive support on Wednesday if the latest HSBC India Services PMI comes in positively.
The USD/INR exchange rate was trading in the region of 63.3820.