What’s going on here?
The Indian rupee soared to its highest level since mid-July, bolstered by the Federal Reserve’s recent rate cut and dollar-selling in the NDF market.
What does this mean?
The rupee gained strength, rising 0.4% last week and reaching a near two-month high. This trend was driven by the Fed’s 50-basis-point rate cut and strong portfolio inflows into Indian assets. Additionally, dollar selling in the non-deliverable forward (NDF) market played a crucial role. The one-month NDF shows the rupee opening at 83.48 to the US dollar, an improvement from the previous close of 83.5625. Currency traders are now focused on the strong support level below 83.50, expecting it to hold firm.
Why should I care?
For markets: A stronger rupee shifts market dynamics.
The Indian rupee’s upward momentum could influence market sentiment, especially compared to its Asian peers who paused their rally. The dollar index’s slight rise to 100.78 reflects the complex interplay of global currencies. With the Fed potentially introducing another 50-basis-point rate cut in November, investors need to stay vigilant. Upcoming US jobless claims and PCE price index reports this week will shed light on the Fed’s future moves and could further impact the dollar’s performance.
For you: Portfolio adjustments and currency outlook.
The strengthened rupee presents opportunities and challenges for individual investors. Consider how the changing exchange rate could impact your portfolio, especially if you hold Indian assets or have exposure to the dollar. Foreign investments in Indian shares increased by $49.1 million on September 19, while bond sales reached $20.7 million according to NSDL. Stay informed about US economic data releases this week to anticipate further currency fluctuations and make timely investment decisions.
