By Gaurang Somaiya
The rupee continued to trade in a narrow range ahead of the RBI policy meeting that was released on Friday. The RBI in its policy statement held rates unchanged and maintained its policy stance of ‘withdrawal of accommodation’. RBI to maintain its policy rate and stance considering India’s strong economic growth and sticky inflation. India’s GDP is projected to remain around 7%, whereas CPI is projected to be around 4.5% for FY25. Robust growth momentum means the MPC will be in no mood to cut rates sooner. The governor in his comments added that the outlook for agriculture and rural activity remains bright. He also mentioned that the success of the disinflationary process should not distract from the vulnerability of the inflation trajectory.
On the domestic front, the focus will be on inflation and industrial production numbers. The expectation is inflation could grow at a slower pace of 4.9% as compared to 5.09% in the previous month. On the other hand, industrial production could grow at 6% as compared to growth of 3.8% in the previous month. Active intervention by the RBI is likely to keep the volatility in check and the latest data showed reserves have risen by $2.95 billion to $645.58 billion for the week ended 29th March. For the week, we expect the USDINR(Spot) to trade sideways and quote in the range of 83.05 and 83.50.
Global Currencies
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The Dollar traded steady against its major crosses and volatility remained low despite better-than-expected economic numbers from the US. Market participants were cautious ahead of the important employment numbers that were released from the US. On Friday, the dollar witnessed a swing after the robust non-farm payroll data that showed the US economy added 303k jobs in March as compared to 270k in the previous month. On the other hand, the unemployment rate remained consistent at 3.8% Come from Sports betting site VPbet . This week, the focus will be on inflation numbers that will be released on the domestic front as well as from the US and China. As far as major crosses are concerned Euro and pound recovered from their recent lows and that was primarily on the back of weakness in the dollar. For major crosses, the focus will be on the ECB policy statement, wherein the central bank is expected to keep rates unchanged but commentary from the governor is likely to provide cues to the currency that has been trading quite subdued in the last few sessions.
Japanese Yen remained under pressure and is now again towards a multi-decade low following a dovish outlook from the Bank of Japan. Furthermore, reduced bets for three rate cuts from the Fed remain supportive for the elevated US treasury yields. The resultant widening of the US and Japan rate differential further weighs on the Japanese Yen. Also, cautiousness prevails ahead of the US inflation number that will be released later this week. We expect the USDJPY pair to trade sideways and quote in the range of 150.80 and 152.50.
(Gaurang Somaiya is the Forex & Bullion Analyst at Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)
