US Inflation Flare-Up Has a Muted Effect On The Indian Rupee

(CTN News) – Despite a pick-up in US inflation, the Indian rupee is likely to open little changed on Friday, despite an expected rise in US Treasury yields prompting a reduction in the likelihood of upcoming Federal Reserve rate cuts following a pick-up in US inflation.

In the last session, the rupee closed at 82.3150 against the US dollar, compared to its close of 83.30-16 as a result of non-deliverable forwards, which indicate that it will open at 83.30-83.32.

The losses in other Asian currencies were moderate as well, with the majority down just a few basis points.

There would have been a lot of stress on the Asian continent if I had thought it to be so. Despite that, it hasn’t happened, making it a dull opening for the day,” a currency trader at one of the banks said in an interview.

According to him, the dollar/rupee pair has entered a phase where dips below 83.20-83.25 are likely to find buyers, while dips below 83.40 are likely to attract sellers, he says.

A measure of inflation rose more than expected on Thursday,

Propelling the 10-year US yield to its highest level since November and the two-year yield to its highest level since December.

During the first quarter of this year, the core PCE increased by 3.7%, which was above expectations of a 3.4% increase.

There are downside risks to” the monthly core PCE deflator, a data point which makes a near-term Fed rate cut all the less likely, according to ING Bank. There is a 0.3% rise in the March core PCE index, which is due later in the day.

“Based on this quarterly print, and assuming that there have been no revisions in January and February, we can expect a monthly core PCE inflation rate for March of 0.48%, which is higher than we had previously estimated,” Morgan Stanley said in a statement.

Currently, investors are pricing in only 35 basis points of total rate cuts this year, and the chances of a Fed rate cut in July have fallen to 1-in-3.

According to the latest statistics, the US GDP increased by 1.6% on an annualized basis last quarter, which was below expectations.

ING Bank said in a statement that, rather than weaker growth, it was higher inflation that caught the eye of the market.

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