Indian Rupee: Supported by BoP and RBI stance – DBS

FXStreet Insights Team FXStreet

DBS economist Radhika Rao reports that USD/INR has eased towards the mid-94 handle as India’s balance of payments (BoP) improves and commodity prices fall. Near term, the Indian Rupee (INR) could benefit further from BoP-accretive flows, though Reserve Bank of India’s (RBI) forward book moderation and a firm US Dollar (USD) limit downside. Over time, DBS expects USD/INR to gradually resume an upward trend.

Rupee gains on flows and Oil correction

"USD/INR eased towards mid-94 handle, with further downside offset by a moderation in the RBI’s forward book (NDF maturities) and a firm dollar."

"In the near-term, rupee stands to gain further on BoP-accretive flows and lower commodity prices."

"Further ahead, we expect the authorities to resume absorbing incremental US dollar inflows to rebuild foreign exchange reserves, paving the way for a gradual resumption of upside in USD/INR."

"We have revised our rate call to an extended pause this year."

"Domestic bond yields were lower across the curve on a correction in oil prices and supportive RBI commentary in the past week."

"Rate hike expectations were also scaled back after dovish cues from the June MPC minutes were reinforced by recent comments from the RBI Governor where he downplayed the urgency to tighten policy levers, saying that rate hike talks were premature and any such intention would have been pre-empted by a shift to a tightening stance in June."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD slides below 1.3250 after failing to break through 23.6% Fibo

The GBP/USD pair meets with a fresh supply during the Asian session on Wednesday and moves away from a nearly two-week high around the 1.3275 region, touched the previous day. Spot prices currently trade around the 1.3235 zone, down 0.20% for the day, as traders look to speeches from Bank of England Governor Andrew Bailey and Federal Reserve Chair Kevin Warsh for a fresh impetus.

EUR/USD tests daily lows near 1.1380; focus on ECB Forum

EUR/USD remains under pressure below 1.1400 on Wednesday amid extra gains in the US Dollar. In addition, softer-than-expected inflation data in Germany and the Euroland fuel expectations of a less aggressive ECB, contributing to the downside mood.

Gold clings to daily gains beyond $4,000 ahead of Warsh

Gold manages to regain composure and advance past the key $4,000 per troy ounce on Wednesday, reversing two daily drops in a row. The yellow metal’s decent bounce comes despite uncertainty surrounding Iran and growing expectations of a Fed rate hike continue to support the Greenback for now.

ISM Manufacturing PMI expected to signal continued expansion in the US

Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index, one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy. Markets expect the headline index to remain unchanged at 54.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The European Central Bank Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Federal Reserve, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.