What’s going on here?
The Indian rupee strengthened on June 27, closing at 83.46 against the US dollar, bolstered by bond inflows ahead of JPMorgan’s index inclusion.
What does this mean?
The rupee gained 0.1%, reaching an intra-day high of 83.44, thanks to inflows into domestic sovereign bonds linked to JPMorgan’s upcoming emerging market debt index inclusion. However, the demand for dollars from domestic oil companies curbed further appreciation. Market signals hinted at likely dollar inflows, with foreign banks persistently offering dollars on behalf of custodial clients. The Indian benchmark 10-year bond was quoted at 100.70 rupees with a yield of 6.9978%, while the 10-year US bond yield also rose during Asian trading hours.
Why should I care?
For markets: Navigating the waters of uncertainty.
The S&P BSE Sensex and Nifty 50 hit record highs, ending up about 0.7%. Meanwhile, the dollar index fell 0.1% to 105.9, with most Asian currencies gaining. Traders are closely watching the weakening of the Chinese yuan and Japanese yen, as their movements could influence the rupee. Lloyd Chan from MUFG Bank notes that Asian currencies are under pressure from high US interest rates, but the Indian rupee remains the region’s least shorted currency.
The bigger picture: Global economic shifts on the horizon.
India’s foreign bond buying through the Fully Accessible Route (FAR) has exceeded $10 billion since last September, driven by JPMorgan’s index inclusion. This signals growing confidence in India’s economic stability and attractiveness to foreign investors. Despite potential headwinds from global currency movements and high US rates, the rupee’s resilience suggests a stronger position in the regional economic landscape.
