The Indian rupee rose to a near three-week high against the dollar as local shares surged on hopes of a rate cut after the government stuck to fiscal prudence, easing concerns of fund outflows.
India’s federal government stuck to a fiscal deficit target of 3.5% of gross domestic product for the year starting Apr. 1, and 3.9% for the current fiscal. New Delhi expects to narrow the fiscal deficit to 3% by Mar. 31, 2018.
Improved risk appetite after China’s rate cut yesterday and a strong rally in shares post budget raised hopes of foreign fund inflows, buoy-ing the Indian currency . People's Bank of China cut its reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points.
The U.S. dollar rebounded against the yen and hit one-month highs against the euro on Tuesday after traders saw the yen's rally as over-extended, while strong U.S. manufacturing data supported views of higher U.S. interest rates.
The European Central Bank is seen certain to deliver another round of policy easing when it meets next week, particularly with the euro zone falling back into deflation. Inflation is now negative throughout the big four euro zone economies... that is seen to mandate a strong response from the ECB .