BRIC currencies mostly gain as US inflation rises
What’s happening: The US dollar edged lower on Wednesday, as investors digested the latest inflation data.
What happened: The Brazilian real, Russian ruble, Chinese yuan, and Indian rupee made advances against the US dollar.
The BRL/USD forex pair is on course for its best week since October 2024
BRICS Currencies
Why it matters: Data released on Wednesday showed that the annual inflation rate in the US accelerated to 3% in January, from 2.9% in the previous month. The figure also came in higher than market estimates of 2.9%. Energy costs grew 1% year-over-year to record the first rise in six months, following a 0.5% decline in December.
Federal Reserve Chairman Jerome Powell had said on Tuesday that the central bank was in no rush to cut interest rates. While US President Donald Trump has been asking for interest rate cuts, there are growing concerns around the government’s tariff policies increasing inflationary pressure
BRICS Currencies Rise
The RUB/USD continued rising on Wednesday, putting the forex pair on track for its strongest week since early October last year. The forex pair had been rising due to lower demand for US dollars by Russian importers. Moreover, the country’s Finance Ministry announced plans last week to boost sales of the Chinese yuan by 17%. The yuan has emerged as the most traded foreign currency in Russia, after sanctions on the country’s US dollar reserves.
The INR/USD had risen sharply on Tuesday, recording the strongest gains in over two years versus the US dollar, after the Reserve Bank of India. The Indian rupee had been on a downward trajectory, with the US announcing tariffs on steel and aluminium and the Reserve Bank of India (RBI) announcing a reduction in the policy repo rate.
The CNY/USD had declined to three-week lows, with the US announcing new tariffs of 10% and additional tariffs on steel and aluminium. Investors have been concerned about increasing trade tensions between the two counties
When BRICS currencies rise
The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 107.94 on Wednesday.
The BRL/USD was trading mostly flat this morning, after recording gains on Wednesday. The BRL/USD, INR/USD and CNY/USD were up 1.08%, 0.14% and 0.29%, respectively, this morning.
What to watch: Investors now await the release of economic data on PPI (1730 UAE Time) and initial jobless claims (1730 UAE Time) from the US today. Factory gate prices in the US, which rose 0.2% in December, are expected to increase by 0.3% in January.
Initial jobless claims, which rose by 11,000 from the previous week to 219,000 in the final week of January, are projected to decline to 215,000.