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USD/INR Exchange Rate Holds Steady amidst Chinese Economic Concerns and Rising Inflation Expectations

Published on 2023-07-11T01:59:29 by Lisa Schleifer

The exchange rate between the US Dollar (USD) and the Indian Rupee (INR) remains stable as the new week begins, following significant gains in the previous week. The currency pair experienced a 0.63% increase last week, ultimately settling at 82.61 on Friday. As of 12:30 UTC, USD/INR is currently trading at 82.60, showing a marginal decrease of -0.02%. The trading range for the day fluctuates between 82.56 and 82.72.

The Rupee, alongside other Asian currencies, is grappling with a sluggish start to the week due to disappointing data emerging from China. Chinese consumer inflation has reached its lowest level in nearly two years, while factory inflation has plummeted by 5.4%, marking its lowest point in seven years. These figures raise concerns about the deceleration of the Chinese economic recovery.

Additionally, the Rupee is receiving support from escalating inflation expectations in India. It is anticipated that Indian inflation for June will rise to 4.58% after a four-month decline. This data suggests that the Reserve Bank of India is unlikely to implement any interest rate cuts in the near future.

Conversely, the US Dollar is exhibiting stability against the Rupee but is gaining momentum against other major currencies. The US Dollar Index, which measures the performance of the greenback against a basket of significant currencies, is currently trading at 102.44, displaying an increase of +0.16% at the time of writing. These gains build upon the positive performance observed last week.

The US dollar is rebounding from the previous selloff and experiencing an upward trajectory as the market absorbs the mixed nonfarm payroll report released on Friday. The report indicated that job creation fell to 209,000 in June, falling short of the forecasted 225,000 and significantly lower than May’s recorded figure of 339,000. This marks the slowest job creation rate witnessed in nearly two years.

Nonetheless, the unemployment rate marginally decreased to 3.6%, and average hourly wages rose by 4.4%, surpassing the projected 4.3% increase. These data points prompted the market to ease up on its previously bullish expectations regarding the Federal Reserve’s monetary policy.

As investors await the release of US inflation data later this week, the US dollar is recovering some of its losses.

Today’s economic calendar features minimal events. Notable Federal Reserve speakers, including Loretta Mester, Raphael Bostic, and Mary Daly, are scheduled to deliver speeches.