- USD/INR remains directionless, offered of late, after September’s heaviest daily loss.
- RBI Governor Das expects Q2 to be better than Q1.
- US President Biden’s six-pronged strategy, Xi-Biden talks favor sentiment of late.
- Indian holiday, light calendar elsewhere to restrict pair moves.
USD/INR struggles for a clear direction despite the latest weakness to 73.51 as European traders brace for Friday’s bell.
The Indian rupee (INR) pair dropped the most in one month the previous day on the US dollar weakness. Following that, the risk-on mood and an off in India troubles the USD/INR traders.
A slump in the US Treasury yields and the Fed policymakers’ indecision over the next moves, while also favoring the tapering and worrying about the covid conditions, mainly weighed down the US dollar index the previous day.
Recently, US President Joe Biden’s cautious optimism while conveying the six-pronged strategy and talks with Chinese President Xi Jin Ping seems to have underpinned the risk-on mood.
Details suggest that the US side refrains from being too optimistic and term talks as ‘a a broad, strategic discussion’. On the other hand, Chinese media said, “Xi and Biden had a candid conversation on US-China ties.”
It should be noted that Biden’s push for vaccinations and masks join the UK’s approval for booster shots of the covid vaccines to add to the market’s slightly positive mood.
On the same line were comments from RBI Governor Shaktikanta Das, from a series of online agenda-setting debates organized by The Indian Express and the Financial Times, per Reuters. The RBI Governor expressed optimism about a recovery in the Covid-hit economy, stating the current quarter (July-September) will be better than the previous (June) quarter, per Reuters.
On the other hand, COVID-19 fears join Australia’s readiness to tease China, by canceling the port agreement, challenges the market optimism and favor the US dollar’s safe-haven demand.
Amid these plays, the US Dollar Index (DXY) drops for the second consecutive day, down 0.05% around 92.47 by the press time, whereas the US 10-year Treasury yields rise 1.1 basis points (bps) to regain 1.31% levels. Further, the stock futures in the US and Europe also remain positive at the latest.
Moving on, an off in India and a light calendar in the US, with only Producer Price Index (PPI) data for August, expected 0.6% MoM versus 1.0% prior, USD/INR traders should pay attention to the risk catalysts for fresh impulse.
Technical analysis
USD/INR failure to cross 100-DMA, around 73.85, followed by a downside break of 200-DMA level of 73.58, keeps the pair sellers hopeful to revisit the latest swing lows near 72.90.
