- The Indian Rupee is trading with a negative bias during Tuesday’s Asian trading session.
- Renewed optimism surrounding trade negotiations between the United States and China is bolstering the US Dollar, thereby exerting downward pressure on the INR.
- Market participants are keenly awaiting the release of both Indian and US Consumer Price Index (CPI) reports, scheduled for later today.
The Indian Rupee (INR) is weakening on Tuesday, facing headwinds from a strengthening US Dollar. Positive signals emanating from the ongoing trade discussions between the United States and China are lending support to the US Dollar (USD), which in turn is weighing on the Indian currency. Furthermore, escalating tensions in the India-Pakistan region could potentially add to the selling pressure on the INR. Geopolitical risks often lead investors to seek safe-haven assets, further diminishing demand for emerging market currencies like the Rupee.
However, the resumption of Indian equity purchases by foreign portfolio investors (FPIs) may offer a degree of support to the INR. Increased capital inflows into the Indian stock market typically strengthen the Rupee. Looking ahead, investors will be closely monitoring the Indian Consumer Price Index (CPI) data for April, scheduled for release later today. This data will provide insights into the current inflationary pressures within the Indian economy, potentially influencing the Reserve Bank of India’s (RBI) monetary policy decisions. Concurrently, the US CPI inflation report is also due for release. Market consensus suggests a headline CPI increase of 2.4% year-over-year (YoY) for April, while the core CPI is projected to show a rise of 2.8% YoY for the same reporting period. These US inflation figures will be crucial in shaping expectations regarding the Federal Reserve’s future interest rate trajectory. Any deviation from these expected figures could trigger significant market volatility. The market is also pricing in future rate cuts from the Federal Reserve, and the CPI data will be a key factor in determining the timing and magnitude of these cuts.
