Rupee jumps sharply against dollar today, after biggest weekly gain in 4 years

Market


The Indian rupee today extended last week’s gains by rising to 80.51 against the US dollar . The rupee had closed at 80.79 against the greenback on Friday, after jumping 2% in the previous week, its biggest weekly gain in four years. The rupee got a boost amid a broader weakening of the dollar after lower-than-expected US inflation reading boosted expectations that US Federal Reserve will go for smaller-sized rate hikes in future.

Market participants expect the US central bank to raise rates by 50 basis points next month. In the last four meetings, the Fed had raised rated by 75 bps each time. The Fed may consider slowing the pace of rate increases at its next meeting but that should not be seen as a “softening” of its battle against inflation, Fed governor Christopher Waller said on Sunday.

Other Asian currencies also traded on a positive note today. The dollar index had slumped more than 1% on Friday in its fourth straight weekly fall. The fall in the US dollar has helped Rupee rise 3% from its recent lows. The 10-year U.S. yield that had dropped by over 30 bps last week.

Forex traders will be keeping an eye on India’s retail inflation data to be announced today. RBI chief Shaktikanta Das, speaking at the HT Leadership Summit on Saturday, said that he expects inflation print for October to be lower than 7%. In comparison, inflation was at 7.41% in September.

The inflation reading would provide more clarity on the local interest rate trajectory. The RBI has hiked repo rate by 190 bps to 5.90% since May.

Oil prices will be also in focus after they rose sharply on Friday. Brent crude futures was 0.3% higher at $96.30 per barrel, after rising 2.5% in the previous session.

Foreign investors have infused close to 19,000 crore in Indian equities so far this month, primarily due to moderating trend in the US inflation and softening of the dollar. This came following a net outflow of just 8 crore last month.

“We expect the strength in the Rupee to continue this week on an improving flow picture. A retest of the breakout level of 80.10 is possible,” IFA Global said in a note.

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