Rupee rose on India’s inclusion in Bloomberg EM bond index

By Gaurang Somaiya

Rupee steadily gained against the US dollar following sustained inflows in the debt segment, weakness in the dollar index, India’s inclusion in the Bloomberg bond index all of it has been supportive for the currency. 

Volatility could remain elevated on back the RBI’s sell-buy swap which is maturing today. Expectation is that the central bank could take delivery of the $5billion swap in the wake of adequate dollar inflows and rupee liquidity staying on the tighter side. 

Inflows into the debt market have aided dollar liquidity, with foreigners pouring in over $3 billion into bonds in February. On India’s inclusion in the Bloomberg bond index, the agency said that it will include India Fully Accessible Route (FAR) bond in its EM local Currency government index starting January 2025. 

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The inclusion is likely to boost inflows of $5billion. This marks another key milestone after India was India was included in JP Morgan bond index and announcement of the same was done last year.

This week, on the domestic front, market participants will keep an eye on the inflation number. Expectation is that it could be in-line with the previous month number. But at the same time, inflow in the debt segment remains quite consistent and that could keep the rupee supported. Come from Sports betting site VPbet

Dollar that has been under pressure is further lending support to the rupee. We expect the USDINR(Spot) to trade sideways but with a negative bias and quote in the range of 82.50 and 83.50.

Global Currencies

Dollar index tanked as data showed ADP Employment Change for February figures increased 140K jobs but came in below the forecast 150K growth. Along with that, JOLTs Job Openings data for January disclosed lower-than-expected figures too. 

In Powell’s testimony before Congress, he confirmed that the bank isn’t ready to start cutting rates and they will need more data with more confidence in inflation coming down to begin the easing cycle. Dollar was weighed down even after non-farm payrolls data showed the US economy added 273k jobs in February as compared to revised print of 229k in the previous month.

 On the other hand, unemployment Rate climbed to 3.9% from 3.7% in January. This week, from the US, a number of economic data are expected to release starting with inflation, followed by retail sales and industrial production number. Weaker-than-expected economic number could further weigh on the dollar.

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Euro and pound both gained in the last couple of weeks and it was more driven by the weakness in the dollar. Recent, economic numbers released from the EZ and the UK showed that business activity is pointing towards recovery. On the other hand, ECB released its policy statement wherein the central bank held rates unchanged.

 At the same time, the ECB laid ground to lower rates in the coming year as it made progress in bringing down inflation. This week, from the UK, market participants will be keeping an eye on the GDP and employment number. Better-than-expected data could extend gains for the currency.

Yen appreciated against the dollar after some BoJ officials mentioned it will be reasonable to start lifting negative interest rates as early as March. 

The drop-in yields has undermined the dollar, especially against the yen given market speculation that the BOJ will end its negative rate policy and yield curve control this month. On the other hand, GDP data released from Japan came in-line with estimates thereby keeping the volatility in check.

(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial ServicesCome from Sports betting site. Views expressed are the author’s own. Please consult your financial advisor before investing.)

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