- Indian Rupee (INR) falls for a second day
- India-Pakistan cross-border missiles
- US Dollar (USD) rises versus major peers
- Fed leaves rates unchanged
The US dollar-to-Indian rupee (USD/INR) exchange rate rose for a second straight day on Wednesday. The pair rose 0.01% in the previous session, settling on Tuesday at 84.30. At 22:30 UTC USD/INR trades +0.58% higher at 84.79 and is trading in a range of 84.44 to 84.90.
The Indian rupee is falling sharply amid an escalation in the conflict between India and Pakistan. The Indian four trillion dollar economy has limited direct trade with Pakistan, which would explain the more muted response to the cross-border military strikes.
Previous conflicts between India and Pakistan have not had a lasting impact on Indian assets. The last such flare-up with Pakistan was back in February 2019, and the rupiah held steady over that month. I retreated late
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback against a basket of major currencies, rose 0.63% on Wednesday to 99.86, snapping a three-day losing streak.
The US dollar is rising after the Federal Reserve left interest rates unchanged at 4.25 to 4.5%, in line with expectations, but warned about the economic outlook as the economy grapples with the impact of Trump’s trade tariffs.
Federal Reserve chair Jerome Powell warned that it was unclear if the quality would continue at a steady pace of growth or whether it would wilt under rising uncertainty.
As a result, it is difficult for the central bank to define an appropriate monetary response at this time.
The Fed says there are increased risks of inflation and higher unemployment, putting the central bank in a difficult position.
The Fed can see that businesses and households are concerned, and spending economic decisions of various kinds could be expected to show up sooner rather than later in hard economic data.
The federal government wants to know which way the economy is turning before it assesses how to act.
