What’s going on here?
On October 10, 2024, the Indian rupee remained stable at 83.9550 against the US dollar, thanks to the Reserve Bank of India’s interventions, even as the Federal Reserve’s possible rate cuts caught the spotlight.
What does this mean?
Despite local equity outflows and climbing US bond yields, the Reserve Bank of India (RBI) has successfully kept the rupee from sliding further. The Federal Reserve’s projected rate cuts have influenced market behavior, with expectations of a 25-basis-point cut in November now at 85%, according to CME’s FedWatch tool. This likelihood has driven dollar-rupee premiums to a one-month low. Meanwhile, the dollar’s strength is showcased by the dollar index reaching 102.8, close to a two-month high. The 10-year US Treasury yield has also ascended to 4.07%, reflecting investor anticipation of the Fed’s monetary adjustments for the rest of the year.
Why should I care?
For markets: Global trends put pressure on currencies.
Asian currencies fell by 0.1% to 0.3%, highlighting the region’s sensitivity to global economic shifts. While the Indian rupee remained stable, the rising US Treasury yields and potential Federal Reserve rate cuts have maintained the dollar’s might, creating a challenging environment for emerging markets.
The bigger picture: US inflation data in the limelight.
Market attention is now on the upcoming US Consumer Price Index (CPI) report, expected to indicate a 0.2% rise in core consumer prices for September. MUFG Bank notes that if inflation exceeds expectations, the Fed might delay rate cuts, potentially reinforcing the US dollar further and impacting global currency markets.
