Rupee posts biggest single-day gain in nearly 4 years vs US dollar
- ByStartupStory | November 11, 2022
After US inflation statistics came in lower than anticipated, the US dollar plunged and the Indian rupee soared on optimism that the Federal Reserve could reconsider its aggressive monetary policy approach. After having closed the previous trading day at 81.80 to the US dollar, the value of the rupee increased to 80.80, a level not seen in two months. According to Reuters, this is the largest intraday percentage increase in the rupee since December of last year.
The benchmark yield on Indian government bonds hit a new low on Friday, falling to its lowest level in over seven weeks, mirroring a similar trend in their US counterparts.
In response to the weaker-than-expected US CPI reading, the markets have lowered their forecast for the range of US Fed funds rates to 4.75-5.0% from 5.00-5.25%. There is hope that the Fed will be less hawkish if inflation slows. Forecasting a range of 80.50 to 80.80 with a downside bias for the USD/INR currency pair “In a note, IFA Global said.
About US dollar
The US dollar index dropped 2.1% overnight after news that headline US consumer inflation climbed less than anticipated in October sent investors fleeing the currency. The yield on the benchmark United States Treasury note fell 32 basis points, down to 3.8290%.
As a result of much lower-than-expected CPI statistics of 7.7%, the US dollar index fell yesterday by the most in a single day since 2009, sending the rupee soaring to a new all-time high of 80.70. (YoY). The Federal Reserve’s hardline posture may soften as a result. In response to the dollar’s more than 2% decline, other major currencies rose sharply “according to LKP Securities VP Research Analyst Jateen Trivedi.
The rise of the US dollar this year has been a drag on all currencies of developing markets, including the Indian rupee. Year-to-date, the value of the rupee has decreased by around 8.5% versus the US dollar.
Additionally, robust local stock markets lent assistance to the currency. Overnight, all three main US stock indices had their largest one-day percentage increases in around two and a half years, sparking a wide and sustained surge that pushed the S&P BSE Sensex up by more than a thousand points.
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