Indian Rupee Trades with Slight Negative Bias Despite Firm US Dollar and Weaker Data

On Tuesday, the Indian Rupee (INR) exhibited a mild negative bias, despite the strength of the US Dollar (USD) and weaker-than-expected Indian data. India’s HSBC Manufacturing Purchasing Managers Index (PMI) for March rose to 59.1 from the flash estimate of 56.9, albeit slightly below the market consensus of 59.2. The INR experienced a slight decline following the release of the PMI data.

The Reserve Bank of India (RBI) is set to convene its first bi-monthly monetary policy meeting from Wednesday to Friday. Various polls indicate that the RBI is likely to maintain the repo rate steady at 6.50% during the upcoming meeting. This decision comes as the RBI evaluates robust domestic economic growth prospects amid persistent food inflation, while also considering hints from Fed officials regarding potential rate cuts later in the year. The prevailing narrative of higher interest rates for a longer duration in India could bolster the INR and provide support for the USD/INR pair.

Looking ahead, market focus will remain on the RBI interest rate decision and the release of US March Nonfarm Payrolls on Friday. These events are expected to have significant implications for the currency markets, shaping the near-term trajectory of the Indian Rupee amidst broader economic dynamics and global monetary policy trends.

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