The Indian Rupee (INR) is experiencing a decline during Thursday’s Asian trading session, primarily influenced by a subdued domestic market and a strengthening US Dollar (USD). The upcoming release of crucial US Consumer Price Index (CPI) inflation data further adds to the market’s cautious sentiment. The INR, while currently under pressure, may receive support from positive macroeconomic fundamentals and foreign investment interest, particularly following recent announcements regarding India’s inclusion of sovereign bonds in global indices.
On Thursday, attention will be focused on the pivotal US CPI data release. In addition, Initial Jobless Claims data will also be published, providing further insights into the labor market. Key officials from the Federal Reserve, including Lisa Cook and John Williams, are expected to provide commentary that could influence market expectations.
Recent developments have confirmed that Indian government bonds will be included in the FTSE Russell Emerging Markets Government Bond Index, a move that aligns with similar decisions from JP Morgan and Bloomberg. This change is set to increase the attractiveness of Indian bonds to international investors.
Locally, the Reserve Bank of India (RBI) has opted to keep the repo rate steady at 6.5% for the tenth consecutive meeting while shifting its stance from a withdrawal of accommodation to neutral. The RBI has retained its CPI inflation estimate for fiscal year 2025 at 4.5% and continues to forecast GDP growth at 7.2% for the same period.
In the US, Federal Open Market Committee members are contemplating further interest rate adjustments, with discussions on balancing inflation control and labor market stability. Fed officials are showing cautious agreement on potential interest rate cuts, especially in light of decreasing inflation rates and increasing economic vulnerabilities.
As for the INR’s market performance, it is currently struggling, with the USD/INR pair demonstrating a constructive outlook on technical indicators. However, crossing the 84.00 psychological barrier proves challenging for bulls, while key support levels exist near 83.90 and 83.67, with the potential for significant market movements depending on momentum and selling pressures.
