Synopsis – USD strengthened against major currencies as market participants bet on fiscal stimulus and aggressive vaccinations which will help the U.S. to grow faster than other economies. INR is under pressure as the covid situation continues to deteriorate.
USD traded higher against major currencies last week amid expectations of strong U.S. economic growth, helped by more fiscal stimulus and an accelerating vaccine rollout. US 10-year Treasury yields rose to 14-month highs on Tuesday as a selloff in bond markets continued on expectations for stronger growth and inflation ahead. However, the yield eased back to below 1.70% level on Thursday.
U.S. President Joe Biden unveiled his long-awaited USD 2 trillion-plus infrastructure rebuilding plan on Wednesday, injecting more funds into the U.S. economy after his recently approved USD 1.9 trillion coronavirus relief package. This comes with the U.S. economy already showing signs of a strong recovery as its aggressive vaccination program results in large parts of the country reopening.
U.S. manufacturing activity soared to its highest level in more than 37 years in March. The Institute for Supply Management (ISM) said on Thursday that its index of national factory activity jumped to a reading of 64.7 last month from 60.8 in February. That was the highest level since December 1983.
The number of U.S. citizens filing for new claims for unemployment benefits unexpectedly rose last week, though the labor market recovery is gaining traction as economic activity picks up, driven by increased vaccinations and massive fiscal stimulus. Initial jobless claims jumped by 61,000 to 719,000 for the week ended March 27, the Labor Department said.
INR under pressure as the covid situation continues to deteriorate
INR came under pressure as the covid situation continued to deteriorate. The number of new daily covid infections topped 70,000 on Thursday. This is the highest level in 5 months. Fears are growing that the surge could hold back the economic recovery in India.
INR posted its first quarterly fall against USD in four quarters. However, INR still managed to achieve 0.5% gains against the USD this month, far outperforming its emerging market peers.
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