The US dollar maintained its position near a one-month high against major currencies during early Asian trading on Thursday. The dollar index, which tracks the greenback against a basket of currencies including the yen and euro, rose 0.63% to 102.85—a level not seen since October 14. This movement is driven by growing market expectations for further Federal Reserve interest rate hikes following a stronger-than-expected October inflation report.
Traders have increased bets on monetary tightening after US central bank officials expressed concern over persistent inflation, with some brokerages, including Goldman Sachs, projecting additional rate increases in December and early next year. Meanwhile, the Japanese yen edged closer to the 160-per-dollar level. Analysts suggest that any signals from Fed officials, such as New York Fed President John Williams, regarding the pace of these hikes will be closely monitored by global markets.
In India, market sentiment remains robust, with the Sensex climbing 773 points to close at 81,879 on Wednesday, reaching its highest level in nearly nine months. This rally follows record inflows from foreign portfolio investors (FPIs), who have invested a net total of Rs 73,200 crore in Indian equities during the first eight trading sessions of November. This figure surpasses the previous monthly record of Rs 66,135 crore set in December 2023.
Market analysts attribute the positive momentum in India to a combination of factors, including a 21% decline in crude oil prices this month and encouraging corporate earnings for the July-September quarter (Q2FY27). Additionally, the rupee has strengthened by 1.3% in November, reaching 93.7 against the dollar. The aggregate market capitalization of companies listed on the BSE reached an all-time high of Rs 510.7 lakh crore on Wednesday, an increase of Rs 4.3 lakh crore in a single session.
Key facts
- The US dollar index rose 0.63% to 102.85, marking its highest point since October 14.
- Foreign portfolio investors net-bought Rs 12,563 crore of Indian stocks on Wednesday alone.
- The Sensex gained 10%, or approximately 7,400 points, during the first eight trading sessions of November.
- BSE data shows investors' wealth reached an all-time high of Rs 510.7 lakh crore.
- Japanese wholesale prices rose 7.1% in the year to October, according to Bank of Japan data.
Why it matters
Market experts suggest that Indian equities are likely to sustain positive momentum due to an improving earnings trajectory and the recent sharp correction in crude oil prices. The reversal in foreign investment trends, as managers shift focus back to India following a period of reallocating funds to AI-related stocks elsewhere, is expected to continue supporting the current rally.
Background
The recent shift in market dynamics follows US midterm election results, which some analysts believe have raised the possibility of a diplomatic resolution to the conflict in West Asia, contributing to a global cooling of inflation expectations.
Source: Economic Times, Times of India
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