The MSCI world index hit a two-year high on Wednesday and has only fallen twice in the last 15 sessions; the S&P 500 hit a record high and is nudging 5000 points; the MSCI index of developed market stocks also hit a record high.
Although the broad steer from three Fed officials on Wednesday was to lean against the 120 basis points of rate cuts this year priced into rates futures markets, bond yields and the dollar edged lower after a 10-year U.S. bond auction.
The U.S. Treasury sold $42 billion of debt at auction – one of the biggest 10-year sales on record – at a yield below the prevailing level at the time of bidding, and demand was strong.
The Reserve Bank of India, meanwhile, delivers its latest interest rate decision on Thursday. The RBI is expected to hold its repo rate steady at 6.50% – untouched in a year and likely to stay there until the second half of this year.
Money market pricing points to the first and only rate cut this year coming in August or October, making the RBI one of the least dovish of any central bank. This helps explain why the rupee is one of the few currencies to have risen against the U.S. dollar this year, even if it has been less than 0.5%.
But it is coming from a low base, a record low base, after trading as low as 83.50 per dollar late last year.
