USD/INR bounces back towards 71.25 despite RBI rate cut pause bets
|According to the latest Reuters poll of economists, the Reserve Bank of India (RBI) is likely to refrain from cutting rates again until late this year amid rising price pressures and expectations of a fiscal stimulus to be announced by the Indian government next month, in an effort to boost growth.
Key Findings:
“The latest poll projected the central bank to extend that pause - keeping its repo rate on hold at 5.15% at its February meeting and until at least October.
In response to additional questions, all 42 economists said growth would gradually pick up in the next six months and a majority said inflation would moderate.
The RBI was forecast to next cut rates by 25 basis points to 4.90% in the October-December quarter.
Gross domestic product growth was forecast to average 5.0% this fiscal year, the lowest since polling began for the period in April 2018.
The government was forecast to set a fiscal deficit target of 3.6% of GDP for 2020/21, up from 3.3% targeted for the current year.
While fiscal expansion is generally followed by a spike in price pressures, a majority - over 60% of 39 respondents - said it would not prove to be inflationary.”
FX Implications:
Despite diminishing odds of an RBI rate cut next month, the Indian rupee fails to benefit and trades weaker near 71.20 vs. the US dollar, at the time of writing.
The USD/INR cross hit a fresh eight-day high of 71.26 on Wednesday after the Asian currency was pressured by rising China virus concerns led losses in the Indian stocks.
Meanwhile, India’s stagflation risks and nervousness ahead of the fiscal budget kept the rupee undermined. However, the losses in the rupee were capped by the weakness in oil prices.
USD/INR Technical levels to consider:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.