- USD/INR remains pressured at the lowest levels in three weeks.
- IMF suggests several Asian central banks must raise interest rates rapidly to tame inflation.
- Softer US dollar, oil prices also favor sellers amid sluggish session.
- US Core PCE Price Index will be crucial for fresh impulse amid “technical recession” chatters.
USD/INR drops to the fresh low in three weeks while taking offers at 79.48 during Friday’s Asian session. In doing so, the Indian rupee (INR) pair benefits from the US dollar weakness and hawkish comments from the International Monetary Fund (IMF).
US Dollar Index (DXY) drops to the fresh low since July 05 as the Treasury yields remain pressured around a three-month low amid recession fears. The US 10-year Treasury yields fade early Asian session rebound while declining to the fresh low since April, near 2.67% at the latest.
Elsewhere, a senior International Monetary Fund (IMF) official said, per Reuters, “Several Asian central banks must raise interest rates rapidly, because inflationary pressures are rising due to a global surge in food and fuel costs caused by the war in Ukraine.” The news also mentioned that outflows had been especially large for India, which had seen $23 billion move out since Russia's invasion of Ukraine, he wrote. Outflows had also been seen in such economies as South Korea and Taiwan.
It should be noted that the downbeat prices of WTI crude oil, down 0.65% around $96.00, extends the previous day’s pullback from the weekly top, as slowdown fears weigh on the black gold.
That said, US policymakers, including Fed’s Powell and Treasury Secretary Janet Yellen, tried to shrug off the “technical recession” after the US Q2 GDP dropped for the second consecutive time and teased the concept. The same probes the central bankers pushing for more rate hikes to tame inflation and hence drowning the US dollar. Furthermore, talks between US President Joe Biden and his Chinese Counterpart Xi Jinping also went mostly okay and exerted downside pressure on the greenback’s safe-haven demand.
Additionally helping the INR is China’s readiness for more stimulus as Reuters reported, “China will strengthen efforts to stabilize foreign trade in the second half of the year, the commerce ministry said on Friday.”
Looking forward, the first readings of German and Eurozone GDP for the second quarter (Q2) of 2022 will be important ahead of the Fed’s preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, expected 0.5% MoM for July versus 0.3% prior.
Technical analysis
A daily closing below the ascending support line from May 05, at 79.58 by the press time, becomes necessary for the USD/INR bears to keep reins. Otherwise, a corrective pullback towards the 80.00 threshold can’t be ruled out.