Indian Rupee Opens Higher Against US Dollar After JPMorgan’s Emerging Market Bond Index Inclusion Announcement

Indian Rupee Opens Higher Against US Dollar After JPMorgan's Emerging Market Bond Index Inclusion Announcement
Indian Rupee Opens Higher Against US Dollar After JPMorgan's Emerging Market Bond Index Inclusion Announcement
Indian Rupee Opens Higher Against US Dollar After JPMorgan's Emerging Market Bond Index Inclusion Announcement
Indian Rupee Opens Higher Against US Dollar After JPMorgan's Emerging Market Bond Index Inclusion Announcement

Indian Rupee Opens Higher Against US Dollar After JPMorgan’s Emerging Market Bond Index Inclusion Announcement

Indian Rupee Opens Higher Against US Dollar After JPMorgan’s Emerging Market Bond Index Inclusion Announcement. Image/AFP

Indian Rupee Strengthens on JPMorgan’s Emerging Market Bond Index Inclusion

The Indian rupee opened 27 paise higher against the US dollar on Friday, following JPMorgan’s announcement of including India in its emerging market bond index. The local currency began trading at 82.82 against the dollar, a notable improvement from its previous close at 83.09.

JPMorgan’s Inclusion of India in Emerging Market Bond Index

JPMorgan’s decision to include Indian government bonds in its Government Bond Index-Emerging Markets index and index suite has generated significant market interest. The inclusion process will commence on June 28, 2024, and unfold over ten months, with incremental 1% increases in its index weighting. India is anticipated to reach the maximum weighting of 10% within this period, as per JPMorgan’s announcement.

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Anticipated Inflows and Impact on Indian Bonds

The inclusion of Indian government bonds in the JPMorgan index is expected to result in substantial inflows, potentially amounting to approximately $24 billion. These inflows are anticipated to enter eligible government bonds starting from the beginning of next year and continue until May 2025, according to a note from IDFC First Bank. This development represents a significant opportunity for the Indian bond market.

Global Market Factors

Global financial markets have been influenced by multiple factors. The US dollar index reached a six-month high of 105.74, while the US 10-year Treasury yield climbed to 4.50%, its highest level since 2007. These movements are attributed to expectations that the US Federal Reserve will maintain higher interest rates for an extended period.

Impact of Crude Oil Prices

Crude oil prices, another significant factor in the currency market, saw an increase. Brent futures rose by 0.55% to $93.81 per barrel, and US West Texas Intermediate crude (WTI) gained 0.71% to reach $90.27 per barrel. These oil price fluctuations can have an impact on the rupee’s value.

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Domestic Market Trends

In the domestic equity market, the Indian benchmark indices, Sensex and Nifty, were trading with marginal losses in the pre-opening session. On the previous trading day, Foreign Institutional Investors (FIIs) net sold Indian shares worth ₹3,007.36 crore, while Domestic Institutional Investors (DIIs) net purchased shares totaling ₹1,158.14 crore.

The inclusion of Indian government bonds in JPMorgan’s index is seen as a significant development that could lead to substantial capital inflows into India’s bond market, further strengthening the rupee.

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