Updated January 11th, 2024 at 16:54 IST

Rupee holds steady at 83 against US Dollar as investors await US inflation data

Investors have already factored in expectations of 140 basis points of rate cuts by the US Federal Reserve in 2024.

Reported by: Business Desk
Rupee versus Dollar | Image:Unsplash
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Rupee versus Dollar: Rupee experienced marginal fluctuations against the Dollar, ending almost unchanged on Thursday at 83.0275 compared to 83.0250 in the previous session. The currency had briefly surged to a near one-month high of 82.9350 during intraday trading, driven by Dollar sales from specific foreign banks related to custodial and positional flows, according to traders.

Jigar Trivedi, Senior Research Analyst for Currencies and Commodities at Reliance Securities, noted that despite the influx of Dollars, a convincing close above 83 is necessary to confirm any significant change in the Rupee's trend. He highlighted the crucial role of the Reserve Bank of India (RBI) in managing these flows effectively.

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Investor attention is now turning to the key US inflation data scheduled for later in the day. Analysts anticipate that headline consumer prices may have risen by 0.2 per cent month-on-month in December, with a 3.2 per cent increase over the past 12 months. The core measure is expected to show a 0.3 per cent increase, and year-on-year core prices are estimated to have grown by 3.8 per cent, compared to a 4 per cent rise in November, indicating a potential easing of inflation.

Investors have already factored in expectations of 140 basis points of rate cuts by the US Federal Reserve in 2024, nearly double the indication provided in the central bank's dot plot in December. However, some economists suggest that investors' expectations may be overly optimistic.

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While a consensus inflation print may not trigger a significant Dollar movement, ING Bank suggests that a combination of "only modest core inflation declines and lingering labour tightness will prompt the Fed to push back on rate cuts more forcefully." The note from ING Bank stresses that a narrative suggesting Fed rate cuts before May are unlikely needs to emerge before discouraging Dollar bears.

(With Reuters inputs.)

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Published January 11th, 2024 at 16:54 IST