INR is trading stronger today, in line with other Asian currencies

Investors attention is likely to be cued on to the US inflation data to offer more guidance on possible path for interest rates

Jahnavi Prabhakar,

Economist,

Bank of Baroda    

Mumbai, February 12, 2024: Investors attention is likely to be cued on to the US inflation data to offer more guidance on possible path for interest rates. The Central Bank might be forced to delay its plan for any interest rate cuts (Possibly in May’24), if inflation turns out to be hotter than anticipated. Retail sales and labor market data will also warrant the attention of investors this week. Separately, inflation in Germany (3.1% vs 3.8%) and France (3.4%-2 year low) eased, fuelling bets of interest rate cuts by ECB. BoJ’s Governor in his recent remarks stated they might continue with the accommodative conditions for a longer period even if it abandons the negative interest rate policy. On domestic front, investors will track inflation and industrial production data.

• Global stocks ended mixed. Nikkei recorded a 34-year high as it briefly breached the 37,000 mark (first time since 1990s). S&P 500 notched up gains as it touched the 5000-milestone mark. Investors will await inflation and labour data in order to assess the future path of interest rates. Sensex ended in by green led by a gains in banking and consumer durable stocks. It is trading higher today, while other Asian stocks are trading mixed.
• Global currencies closed mixed, with EUR and GBP making gains against the US$, JPY flat, and INR lower. DXY eased, as market participants try and gauge timing of Fed’s rate cuts and BoJ’s increase in short-term rates. INR fell by 0.1% amidst marginal rise in oil prices. However, it is trading stronger today, in line with other Asian currencies.

Global yields inched up. Yields in US were impacted by investor sentiment ruling in a favour of Fed keeping rates higher for longer, while eyeing Jan’24 CPI data due this week. Probability of Fed delaying rate cuts has increased and it is believed that other Central Banks may follow the suit. India’s 10Y yield rose by 3bps, but is trading a tad lower at 7.10% today. 

(The views expressed in this research note are personal views of the author(s) and do not necessarily reflect the views of Bank of Baroda. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity.)