The Indian Rupee is set to decline due to weaker market sentiment on the back of losses incurred by its peers in the Asian market. Non-deliverable forwards suggest that Rupee will start trading at 81.98 against the US dollar. On Monday, Rupee’s value hovered at around 81.90-82.00. Although a slight upside trend is anticipated for the USD/INR pair, support for the Rupee will most likely remain below 82. The offshore Chinese yuan faced a drop in value as well, reaching its year-to-date low. Asian currencies also suffered a decline between 0.1% and 0.3% while the dollar index rose slightly to 102.56.
Market turbulence comes as Chinese and other global equities take a hit due to China’s weak post-pandemic recovery and Federal Reserve Chair Jerome Powell’s testimony to US lawmakers. Powell will testify about the rate hikes that took place over the past ten meetings that resulted in the Fed opting for a hawkish pause last week. The median view of Fed officials pointed to a terminal rate increase of 50 basis points to 5.625%. Although some indicators show inflation reduction, ANZ notes that it isn’t enough and that more work needs to be done. In May, core US inflation rose by 0.4% month-on-month, which is well above the 2% annualized inflation rate.
Foreign investors seem to be buying Indian bonds and shares, with net purchases of $133.8 million and $22.1 million, respectively, according to NSDL data, indicating some level of confidence in the market. Despite this, it remains to be seen how the Indian Rupee will fare in the face of global economic uncertainties.
