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The USD/INR currency pair was on a firmer side on Thursday amid possible market intervention by the Reserve Bank of India (RBI) to prevent the Indian rupee (INR) from falling below the 84.00 level, five traders told Reuters. Traders were awaiting Indian consumer price index and industrial output data due later in the day.
Additionally, depressed crude oil prices also provided support to the Indian rupee against the US dollar. As the world’s third largest oil importer, India will benefit from lower import costs. Concerns about weakening oil demand offset the impact of Hurricane Francine on U.S. oil production in the world’s top crude producer.
Foreign capital inflows into domestic equities are expected to increase following the release of US Consumer Price Index (CPI) data for August, which may provide support to the Indian rupee. The U.S. inflation report increases the likelihood that the Federal Reserve will cut interest rates by 25 basis points in September to kick off an easing cycle.
Markets fully expect the Fed to cut interest rates by at least 25 basis points at its September meeting, according to the CME FedWatch tool. The probability of a 50 basis point rate cut fell sharply to 15.0% from 44.0% a week ago.
