Ella 
The US dollar edged lower on Friday while the Indian rupee gained momentum. However, the upside for the Indian rupee may be capped as US Treasury yields rise due to better US economic data. Additionally, a rebound in oil prices due to geopolitical tensions in the Red Sea may also weigh on the Indian rupee as India is the world’s third-largest crude oil consumer.
Reserve Bank of India (RBI) Governor Shaktikanta Das said at the Davos Forum on Thursday that it is premature to talk about cutting key policy rates before the inflation target is achieved in a sustained manner. When asked about the possibility of rate cuts in the second half of 2024, RBI Governor Das said inflation is expected to average 4.5 per cent in fiscal 2024-25, which will depend on a number of factors. He further pointed out that the central bank’s focus is to continue to actively curb inflation and continue to reduce the inflation level to 4%.
The preliminary Michigan consumer confidence index and existing home sales data will be released later on Friday. Fed members Daley (San Francisco Fed) and M. Barr (member of the Board of Governors) will speak. If U.S. economic data is stronger than expected and Fed officials delay expected interest rate hikes, it may put some selling pressure on the Indian rupee.
