Motilal Oswal: Even after the RBI released its policy statement, which kept interest rates the same and upheld its “withdrawal of accommodation” position, the rupee continued to consolidate within a small range. India’s robust economic growth and persistent inflation led the central bank to retain its policy rate and position. Motilal Oswal anticipates a positive Dollar Index before to the Fed meeting
An MPC that is seeing strong growth momentum would not be inclined to lower rates sooner. Deepening geopolitical concerns in the Middle East coupled with the dollar’s strengthening against its key crosses caused the rupee to fall to new record lows.
According to figures presented on the home front, inflation increased to 4.89% as opposed to the anticipated 4.9%. However, industrial production increased 5.7% in February compared to 3.8% rise in January, indicating that the manufacturing sector’s growth is still steady.
On the other hand, volatility decreased once the RBI took an active role in the market. The RBI‘s reserves may have decreased somewhat after reaching their peak earlier this month at $648.6 billion, according to the most recent data.
This month, no new domestic economic data is anticipated to be issued save the inflation and industrial production figures. However, it will be crucial to pay attention to this week’s FOMC policy statement; it is anticipated that the central bank may decide to hold rates steady, and the commentary will be what drives the dollar’s volatility.
The rupee may see modest volatility in the first part of the week and increasing volatility in the second half. The USDINR (Spot) is anticipated to quote between 83.10 and 83.80 and trade sideways with a positive bias.
Worldwide Currency
Although there was some buying activity in the dollar at lower levels, gains were limited when statistics revealed that the US economy grew in the first quarter at its slowest rate in over two years. A slight accumulation of unsold items at firms and a spike in imports contributed to the general weakness.
The GDP grew last quarter at its slowest rate since the second quarter of 2022, 1.6% annually. After growing at a 3.3% rate in the fourth quarter, the economy expanded at a 3.1% rate when inventories, government spending, and trade were excluded.
According to the most recent data, the weekly jobless claims report showed that initial claims for unemployment benefits decreased by 5,000 to a seasonally adjusted 207,000, indicating that there has not yet been a severe downturn in the labor market.
However, the core PCE index increased slightly to 2.8% in March, and rising housing and utility costs imply that the Federal Reserve may decide to maintain high interest rates for some time.
Aside from the Fed’s policy speech this week, market players will be watching the non-farm payrolls data, which might have an impact on the dollar. The Dollar Index is predicted to quote between 105.20 and 106.80 and move with a positive tilt.
