- USD/INR picks up bids to reverse the previous day’s losses.
- DXY refreshes 24-year high as Fed Fund Futures hint at 75% chance of 0.75% rate hike in September.
- Rupee traders fail to praise Indian FinMin optimism amid recession woes.
- Reuters poll suggests more trouble for INR, focus on Fedspeak.
USD/INR prints mild gains around 79.95 during the initial Indian trading session on Wednesday. In doing so, the rupee (INR) pair recalls the sellers amid broad US dollar strength, as well as an absence of optimism at home.
“India's digital revolution offered investment opportunities for the United States,” said Indian Finance Minister (FinMin) Nirmala Sitharaman per Reuters. The Finance Ministry report also mentioned that the external debt rose by 8.2% YoY to USD 620.7 billion as of March 2022. The communiqué terms it sustainable but failed to impress INR buyers.
On the other hand, India's battered rupee will trade not far from its lifetime low against the U.S. dollar into next year and remain vulnerable to a worsening trade balance and an aggressive U.S. Federal Reserve rate-hiking campaign, according to a Reuters poll.
It should be noted that the latest downbeat oil prices seem to probe the USD/INR buyers, due to India’s reliance on oil imports. That said, WTI crude oil prices drop to the fresh low since late January, down 1.90% near $85.00 by the press time, whereas
US Treasury yields rally to a fresh multi-day high to propel the US Dollar Index (DXY) towards renewing the two-decade top. The same joins hawkish Fed bets to weigh on the market sentiment and push USD/INR to the north. US ISM Services PMI rose to 56.9 versus 55.1 market forecast and 56.7 prior. However, the S&P Global Composite PMI and Services PMI eased to 44.6 and 43.7 respectively versus 45.0 and 44.1 initial forecasts in that order. Even so, the US Dollar Index (DXY) rose after the release and refreshed a 20-year high. It should be noted that the CME’s FedWatch Tool signals 72.0% chance of 50 basis points (bps) Fed rate hike in September versus 57% one-day ago.
While portraying the mood, Asia-Pacific shares remain pressured while S&P 500 Futures drops to the fresh low in seven weeks, down 0.55% intraday around 3,890 at the latest.
Looking forward, a light calendar at home keeps USD/INR at the mercy of Western events and risk catalysts. Hence, the monthly prints of the US trade balance and Fed Beige Book updates could entertain traders. However, major attention will be given to the various Fed speakers scheduled for public appearances in the next two days, including Fed Chairman Jerome Powell.
Technical analysis
Although a downward sloping resistance line from late July restricts short-term USD/INR upside near 80.25, the bears need validation from the monthly support line, at 79.65 by the press time.
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