- USD/INR prints mild gains after bouncing off one-week low the previous day.
- Hawkish Fed bets, oil price rebound favor buyers during inactive trading session.
- Risk-on mood underpins Asian currencies’ strength versus the greenback.
- US housing data, risk catalysts will be crucial for near-term directions, RBI intervention eyed as well.
USD/INR picks up bids to 82.35 during the second consecutive positive daily performance amid an inactive Asian session on Wednesday. In doing so, the Indian rupee (INR) pair fails to track its Asian peers even as risk appetite remains firmer.
The reason could be linked to the market’s indecision amid hawkish Fed bets and the comments suggesting heavy rate hikes from the US central bank. That said, CME’s FedWatch Tool signals that markets are pricing in a nearly 95% chance of the Fed’s 75 rate hike in November.
While tracing the clues, the latest comments from Minneapolis Federal Reserve Bank President Neel Kashkari could be held responsible. “Until I see some compelling evidence that core inflation has at least peaked, not ready to declare a pause in rate hikes,” said the policymaker.
It should be noted that the US Industrial Production for September improved but the NAHB Housing Market Index for October dropped, respectively around 0.4% MoM and 38 versus the market expectations of 0.1% and 43 in that order.
Other than the positive catalysts for the US dollar, firmer oil prices also propel the USD/INR prices, due to India’s heavy reliance on energy imports and the record deficit.
WTI crude oil remains mildly bid at the fortnight low marked the previous day, around $83.70 at the latest. The black gold’s recent weakness could be linked to the fears that the US will release more oil from its Strategic Petroleum Reserve (SPR) to battle the OPEC+ supply cut.
On the contrary, fears that the Reserve Bank of India (RBI) will again defend the Indian rupee's weakness, like it did multiple times in the past when the USD/INR rose to 82.40, seems to weigh on the pair’s upside momentum. In this regard, Reuters stated that some bankers it spoke to said the rupee's decline from the 82-level was due to dollar demand from oil companies and other importers, while two others said it was likely due to the Reserve Bank of India (RBI) buying USD/INR futures ahead of Friday's expiry.
Amid these plays, the S&P 500 Futures rise nearly 1.0% intraday to poke a two-week high, tracking Wall Street’s second daily gain, whereas the US 10-year Treasury yields add two basis points (bps) near 4.0% mark at the latest.
Moving on, a lack of major data/events could restrict USD/INR moves but risk-on mood and fears of RBI’s intervention can challenge the buyers.
Technical analysis
USD/INR sellers need a daily closing below a 10-day EMA level surrounding 82.17 to retake conviction.