USD / INR continues its uptrend influenced by rising oil prices and US yields

opened the day much higher at 75.13 registering a 15 paise / USD gain from its Friday close. While Asian stocks are trading higher and local stocks are well positioned to record new lifetime highs, the currency pair is likely to test resistance at 75.30 before a rally can be seen with the help from the RBI intervention.

RBI in its policy announcement Friday last week revised its projection for the July-September CPI to 5.1% from the previous forecast of 5.9%. RBI also reported that due to the high rupee liquidity in the market, the need to undertake further G-SAP operations at this stage does not arise even though RBI would remain ready to undertake G-SAP when conditions liquidity justify it while remaining flexible. in the conduct of OMOs and Operation Twist (OT). As a result of the policy announcement, there is no major change in sovereign bond yields, the value of the rupee against the dollar and no downward correction in local stocks.

For a second month in September, non-farm payrolls increased by 194,000 after an upward revised gain of 366,000 in August. The unemployment rate fell to 4.8%, while the average hourly wage jumped 0.6%. With employment data neutral, some market participants expect the Fed to address the disappointment by attributing it to temporary weakness due to the covid and the announcement of the cut in November. The Fed may view the report as more positive overall than the payroll figures. The current is trading at 94.13 and the US 10 year yield has risen slightly and is trading at a 4 month high of 1.6120%.

With more than half of US FOMC figures predicting the first interest rate hike by the end of next year. It looks like interest rates that have been pegged near zero over the past 18 months may rebound earlier than expected to cope with rising inflation. On the positive side, Powell assured the markets that there would be no hike in interest rates while the Fed slows with currently high inflation, meaning real interest rates are expected to stay low until. at the end of 2022.

Fitch Ratings cut India’s economic growth forecast to 8.7% for the current fiscal year, but raised the GDP growth projection for fiscal year 2022-2023 to 10%, saying the second wave of covid-19 has delayed rather than derailed the economic recovery. Fitch maintained his BBB- with a negative sovereign rating due to high government debt, weak financial sector and some lagging structural factors.


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Felix J. Dixon

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