USD/INR Struggles for Direction Amid Higher Inflation, Exports

The Indian rupee struggled for direction against its US peer to start the holiday-shortened trading week. The rupee has benefited from greater risk tolerance in the broader financial markets, with investors willing to return to emerging market currencies rather than pouring into traditional safe-haven assets. The latest inflation and trade data are driving the rupee on Monday.

According to the Office of the Economic Advisor, the inflation rate rose by 2.03% year-over-year in January, up from 1.22% in December. This represented the sixth consecutive month of higher wholesale prices. The market had penciled in a jump of 1.3%.
Energy prices tumbled 4.78% last month, up from the 8.72% slide in the previous month. Food prices also declined for the second straight month, slipping 2.8%. Manufacturing prices gained 5.13%, up from 4.24%.
Last week, the government reported that the inflation rate surged at an annualized rate of 4.06% in January, lower than the median estimate of 4.45%.
On the trade front, the Ministry of Commerce and Industry confirmed that the trade deficit narrowed to $14.75 billion in January, down from $15.3 billion at the same time a year ago. Exports surged 5.4% to $27.24 billion, thanks to cereals, oil meals, iron ore, and jute manufacturing, Imports climbed 2% to $41.99 billion, with gold pulses, pearls, and iron pyrites leading the purchases.
As the coronavirus pandemic continues to subside in India, financial experts are looking ahead. PHD Chamber of Commerce and Industry officials are forecasting that the nation’s gross domestic product (GDP) will return to positive growth in the third and fourth quarters of 2021, citing various reforms and the latest positive economic and business measurements activity.

On the back of various reforms undertaken by the government in last 10 months along with a demand boosting and investment inducing Budget, the expectations of a positive GDP growth in Q3 and in Q4 FY 2020–21 are becoming strong.

Meanwhile, the number of new COVID-19 infections has fallen to a ten-month low, with the seven-day average dropping to around 11,000. At its peak, the seven-day average had been about 93,000 in September.
In total, cases have hit nearly 11 million, with a death toll of 156,000.
The USD/INR currency pair edged up 0.02% to 72.6114, from an opening of 72.5934, at 09:31 GMT on Monday. The EUR/INR advanced 0.08% to 88.06, from an opening 87.98.
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Original from: www.earnforex.com