look news india
New Delhi: The rupee is likely to strengthen against the dollar after falling 0.4 per cent so far in July. A study says that if most of the data in the US is favorable, the US Federal Reserve may cut rates drastically, which will strengthen the rupee. The dollar will weaken due to the fall in short-term interest rates in the US and softening of yields.
The US has seen negative economic surprises overall. If future data shows inflation continues to decline and the labour market also weakens, the market may expect a sharp rate cut. Federal Reserve Chairman Powell has already said that he should not wait for inflation to reach 2 per cent before cutting rates.
The unemployment rate in the US has crossed 4 percent for the first time since November 2021. Apart from this, the inflation rate based on the Consumer Price Index in the US was the lowest in 4 years at -0.1 percent. In such a situation, the market is hopeful that the US rate setting committee may cut rates from September.
The intervention of the Reserve Bank of India in the foreign exchange market can play an important role in deciding the movement of the rupee. Economists said that the current volatility is due to the impact of the budget and the exit of foreign portfolio investors, which will end soon. It also depends on the intervention or statements of the Reserve Bank of India.