- USD/INR print three-day uptrend, picks up bids of late.
- Markets doubt RBI Minutes terming rise in inflation as softer than expected amid firmer oil prices.
- DXY refreshes three-week low amid risk-on mood, helped by China.
USD/INR struggles to cheer the broad US dollar weakness, down 0.08% intraday around 75.00 heading into Monday’s European session. The reason could be linked to the concerns over the Reserve Bank of India’s (RBI) inaction, as well as inflation view, amid surging oil prices.
On Friday, minutes of the latest RBI meeting conveyed that India's monetary policy committee sees the need for continued policy accommodation as the economic recovery remains fragile, with the rise of inflation less steep than expected. However, Goldman Sachs (GS) recently rang the inflation alarm and the need for monetary policy change. “India Monetary Policy Committee’s (MPC’s) concerns on persistent core inflation amid high commodity prices coming to fore,” said GS per Reuters.
Improvement in India’s covid conditions and strong vaccinations should have also helped the Indian rupee (INR) but does not as market players seem to prepare for future tightening of the RBI. As per the latest government figures, there are 14,306 new cases versus 15,906 reported yesterday. Further, the government claims to have jabbed over 1.02 billion population, running the world’s biggest vaccination drive.
On a different page, China’s ability to regain the formal seat at the United Nations (UN) and the People’s Bank of China’s (PBOC) efforts to safeguard the financial system, recently by a net 190 billion yuan injection, underpin the positive sentiment, weighing on the US dollar. Further, the latest comments from the US policymakers, including President Joe Biden and House Speaker Nancy Pelosi, also signaled nearness to the much-awaited infrastructure spending deal of late and dragged down the US Dollar Index (DXY). Above all, the Fed tapering chatters seemed to have failed to underpin the US Treasury yields.
Against this backdrop, MSCI’s index of Asia-Pacific shares outside Japan gains 0.20% intraday whereas S&P 500 Futures reverse the early Asian losses to poke the record high flashed on Friday.
Looking forward, USD/INR traders remain at the mercy of the US dollar moves and the market’s preparation for the RBI’s action. However, the US Chicago Fed National Activity Index for September and Dallas Fed Manufacturing Business Index for October can offer intermediate clues.
Technical analysis
USD/INR recovery needs to conquer the 75.10 hurdle, comprising 10-DMA and a two-week-old resistance line, to aim for the monthly high near 75.65, failures to do so can recall the bears.
