The Indian rupee is poised to start the day flat on Friday, maintaining a narrow range as it navigates between India’s impressive December quarter growth figures and the uptick in the dollar index.
Non-deliverable forwards suggest that the rupee will open with little change from its previous session close at 82.9125. Throughout the week, the domestic currency has traded within a tight range of less than ten paisa, influenced by central bank dollar buying and inflows.
An FX trader at a bank remarked that the rupee’s range this week “has probably been squeezed more, if that was possible.” Despite the notable growth in India’s GDP during the December quarter, the trader suggested that economic indicators such as this have had limited impact on the rupee’s performance.
India’s economy expanded at its quickest pace in one-and-a-half years during the December quarter, surpassing expectations and bolstering confidence among market participants regarding the rupee’s medium-term prospects.
In contrast, the dollar index saw an increase on Thursday amid a volatile trading session. The U.S. Federal Reserve’s preferred gauge of inflation supported expectations that the central bank would not implement rate cuts at its March or May meetings.
The U.S. personal consumption expenditures (PCE) price index rose by 0.3% last month, aligning with expectations, while the core PCE registered a 0.4% increase. This data followed higher-than-expected consumer inflation figures for January in the U.S.
Reflecting on Thursday’s data, ING Bank noted, “Given the recent performance of U.S. data, the fear was we could get yet another upside surprise.” While the latest figures are deemed too hot for the Fed to consider an immediate rate cut, ING acknowledged the consistent trend of tracking below the required monthly rate needed to achieve an annual inflation target of 2%.
As the rupee continues its balancing act between domestic growth indicators and global economic trends, market participants remain attentive to further developments that could influence currency movements.