US government avoids shutdown
USD, despite falling lower on Friday, ended the week higher as it traced treasury yields higher amid expectations that the Fed could start tightening monetary policy sooner than its peers as inflation remained stubbornly high. Federal Reserve Chair Jerome Powell in testimony to congress acknowledged that inflation could remain elevated for longer than the Fed anticipated.
During the week, safe-haven flows also supported the USD as concerns over the US debt ceiling threatened to shut the US government down before the end of the year. However, on Friday, the U.S. government avoided shutdown after Congress passed a funding plan that would keep the government running until Dec. 3.
The ISM manufacturing PMI showed that activity remained strong in the sector. The PMI came in at 61.1, up from 59.9 in August, against the expectations of a decline to 61.1. Michigan consumer confidence data also came in stronger than expected at 72.8, up from 70.3.
Crude oil price surge, drags INR
INR ended the week lower due to the soaring crude oil prices fueling global inflation. India’s current account came in surplus in the three months from April to June. However, India could struggle to maintain the surplus as commodity prices rise.
The current surplus was USD 6.5 billion or 0.9% of GDP compared to USD 19.1 billion in the same quarter a year ago, which marked a record-high quarter.
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