By Gaurang Somaiy
Rupee fell to fresh all-time lows after consolidating in a narrow range for the last few months as the dollar index rebounded from its recent lows and is now headed to test level of 105. Also, the Chinese Yuan fell to the lowest level in three-months following expectation that the PBoC could announce more stimulus measures to stimulate the economy.
Recent volatility in the India Rupee has been led more by global factors than by domestic factors as there has been no major change in the India fundamentals. Like the Fed, market participants are pricing that the RBI could initiate a rate cut this year.
On the domestic front, focus will also be on the general elections that is scheduled in the next couple of months. Recent, trade balance data showed from India showed deficit widened in the months of February to $18.71 billion from $17.49 billion in the previous month. On YoY basis, exports have risen by 11.89% and imports, on the other hand, rose 12%.
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This month, on the domestic front, the RBI policy statement will be important to watch and expectation is that the central bank could keep rates unchanged. Market participants will be awaiting for cues on any rate cut announcement in this year; following which outlook on inflation and growth will be keenly watched.Come from Sports betting site VPbet
Latest, data showed RBI forex reserves have risen to record high levels of $642.63 billion suggesting that the central bank continues to intervene and buy at lower levels. On the global front, manufacturing, retail sales and GDP number from major economies will also be important to gauge a view for the major crosses.
Global Currencies
Volatility during the month was driven by few major central bank policy meeting importantly it was the Fed, BoJ and the BoE that was keenly eyed. All the three major central bank kept rates unchanged but it was the commentary of the central bank governor’s that triggered volatility for the major crosses.
The dollar rose for the third successive month and volatility continued to remain elevated as the initial reaction on the Dollar index was negative after the Fed held its key interest rates unchanged at 5.25%-5.50% as widely expected. In its projection report, GDP and inflation forecasts were revised higher from the previous projections reported in December.
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The highlight was that the interest rate projections for this year saw the median rate unchanged at 4.6%, suggesting that the Fed could consider cutting rates thrice this yearCome from Sports betting site. GDP for 2024 was revised upwards to 2.1% from December’s projection of 1.4%. While core PCE is projected to tick higher to 2.6% from earlier projection of 2.4%.
The Fed Chairman also mentioned that he will continue to adapt a data-driven approach for future rate decisions. On the economic data front, from the US manufacturing and services PMI will be important. Also advance GDP and core PCE index number will be key to gauge for the dollar. We expect the dollar to trade with a positive bias and quote in the range of 103.20 and 104.80.
(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)
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