The rupee’s value has significantly increased against the US dollar. A 10.9 paise surge is witnessed in the market. The US inflation is a potential factor behind this change.
In a remarkable turn, the Indian rupee demonstrated a noteworthy increase against the US dollar on Thursday, 16th November, marking an opening value of 83.229. This reflects a surge of 10.9 paise from the previous day’s closing rate of 83.12. The ascent is closely tied to a discernible depreciation of the US dollar and a reduction in US Treasury yields.
While the dollar index, gauging the US dollar against major currencies, experienced a marginal 0.02% rise, reaching 104.08, after dipping below the 104 level in the preceding session, the 10-year US benchmark yield remained relatively steady at 4.45%, with a slight dip to 4.41%.
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The rupee’s performance was influenced by recent market closures, with Indian markets observing a shutdown on Tuesday. Notably, on Monday, the rupee was slightly higher at 83.33 against the dollar.
Softer inflation data instigated the significant dip in the US dollar, the most substantial in a year. This led to speculations that the US Federal Reserve might pause interest rate hikes and potentially consider rate cuts by mid-2024.
Anand James, Chief Market Strategist at Geojit Financial Services, emphasised the rupee’s resilience, indicating potential fluctuations between 83.02 and 83.19, with a likelihood of the rupee dipping to 82.78.
Regarding inflation data, US inflation in October witnessed a year-on-year increase of 3.2%, slightly lower than September’s 3.7%, just below economists’ predictions. In contrast, India’s Consumer Price Index (CPI) reported a decline in retail inflation to 4.87% in October, marking a four-month low.
ICICI Direct anticipates continued strengthening of the rupee, citing subdued US CPI figures and the possibility of the Federal Reserve pausing its rate hike cycle. The USD INR is expected to reach 83.00, potentially dropping to 82.80. However, the upward trajectory might face obstacles due to rising crude oil prices, with Brent crude at .76 per barrel and US West Texas Intermediate at .50 per barrel.
In conclusion, the surge in the Indian rupee, marked by a 10.9 paise uplift against the US dollar, is intricately tied to the dollar’s visible depreciation and the softening of US Treasury yields.
Recent market closures and softer inflation data have fueled speculation about a potential pause in US Federal Reserve interest rate hikes. While India’s Consumer Price Index reports a decline, challenges may arise from rising crude oil prices, potentially impacting the upward trajectory of the rupee.
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