Meanwhile, the alpha generated on US government bonds has dropped despite mounting expectations of consecutive 25 basis points (bps) interest rate hike from the Federal Reserve (Fed). The 10-year US Treasury yields have dropped sharply to near 3.37%.

Further movement in the USD Index is likely to be guided by the US inflation data, which will release on Wednesday. The investing community is anticipating a rebound in core inflation figures as a higher labor cost index due to the tight labor market is making overall demand resilient.

On the Indian Rupee front, Reserve Bank of India (RBI) Governor Shaktikanta Das kept the interest rate policy unchanged for the first time since May 2022. RBI Governor cited contagion fears from global banking turmoil as a major reason for keeping rates steady. He further added that the central bank reached its pivotal rate yet and a steady policy is a cautionary move to maintain economic prospects.

Going forward, Indian investors will keep an eye on oil prices, which have been sideways for a week. The oil price is auctioning in a bounded territory after a gap-up move inspired by the surprise announcement of production cuts from OPEC . It is worth noting that India is one of the leading importers of oil in the world and higher oil prices would impact the Indian Rupee.