BackRupee extends gains to 7th day against US dollar: 5 things to know
Rupee as well as the bond markets got a boost after softer-than-expected inflation dataForeign flows into bond market could get a boost, say analysts
PremiumThe Indian rupee (INR) extended its gains to the seventh day against the US dollar (USD), rising to 70.40 a dollar. The rupee had closed at 70.71 a dollar on Tuesday. In the last six trading sessions, the rupee has gained 110 paise. Tracking gains by other Asian currencies against the US dollar, the rupee today opened at 70.50 and traded in a range of 70.40-70.59 so far during the day. The rupee as well as the bond market got a boost after data released on Tuesday showed that retail consumer inflation in January rose 2.05%, its slowest pace since June 2017, increasing the possibility of an RBI rate cut in April.
Here are 5 things to know about USD-INR trade today:
1) With retail inflation coming in below the RBI’s target for the sixth straight month, analysts believe the central bank could cut the key interest rate at its next policy review in April after a surprise reduction in the repo rate last week. A further cooling off of inflation expectations will be encouraging for portfolio flows, especially into the local bond market, and this could also support the domestic currency, Reliance Securities said in a note.
2) Emerging Asian currencies, including the rupee, got a boost after US President Donald Trump on Tuesday said he would consider extending the deadline for a trade deal with China beyond 1 March, "if we're close to a deal". The comments came as the third round of trade negotiations between world’s two largest economies are set to resume in Beijing to avert more than doubling tariffs on $200 billion in Chinese imports to the US.
3) DBS Group Research said in a note that an extension "could avoid further disruptions to the global economy from a potential increase in US tariffs on Chinese goods". However, DBS warned that an extension "will only be possible if China accedes to the US's push for enforcement mechanisms in areas such as forced technology transfer and intellectual property protection".
4) The USD-INR pair could trade in the 70.40-70.80 zone in the near term, said forex advisory firm IFA Global in a note.
5) On the other hand, the rupee could face pressure from higher crude oil prices. Oil prices rose today as producer club OPEC said it had cut supply deeply in January. International Brent crude futures rose above $63 per barrel. Brent has, however, struggled to sustain gains this month on concern that booming US shale output will undermine cuts by OPEC and its partners, and fears that the US-China trade war will weaken demand.
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