What is US Dollar Index? | FedWatch Tool | Debt Inflow in Indian Economy | Bond Inclusion
In the month of January, 2024, despite the dollar index rising up by almost 2%, the Indian Rupee(₹) has appreciated 0.1% against the USD.
The US dollar index is an index measuring the value of USD relative to a basket of 6 major currencies.
In December, 2023 with expectations of a rate cut by the US Federal Reserve, the US Dollar Index registered a decline of over 2%.
But strong US economic data including staggering 3.3% Q4 2023 GDP growth rate with 2.5% for full calendar year, led to anticipation of deferring of rate cuts by Federal Reserve, with FedWatch tool showing 42% traders expecting a 25 bps rate cut in March as compared to 75% in December, 2023.
This led to an increase in the US dollar index in the month of January with ytd rise of 2%.
In response to this, other Asian currencies registered depreciation against USD including Japanese yen(-4.8%), South Korean won(-3.38%), etc.
But thanks to strong inflow in the domestic Debt market from foreign investors (Net inflow standing at ₹15,793 Cr) led by bond inclusion positivity, ₹ stands strong against the USD.
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