- USD/INR reverses from the highest levels in six months, snaps two-day winning streak.
- US Dollar cheered risk aversion wave as central banks prefer higher rates for longer time.
- Easing in Indian trade deficit, traders’ defense of 83.00 and softer oil prices favor pair sellers.
- US PMIs for December eyed for fresh impulse.
USD/INR retreats to 82.75 from a 1.5-month high, marked the previous day, as global markets take a sigh of relief during early Friday.
In doing so, the Indian Rupee pair bears the burden of the market’s consolidation amid a light calendar, as well as the traders’ defense of the 83.00 round figure, not to forget the softer oil prices. Also likely to weigh on the pair could be the recent easing in the Indian trade deficit.
That said, India's trade deficit narrows in November to $23.9 billion from $26.9 billion in October, per the latest readings reported by Reuters. While conveying further details, the news stated that India's merchandise exports for November stood at $31.99 billion, while imports stood at $55.88 billion.
Elsewhere, traders try hard to defend the 83.00 round figure and seemed to have weighed on the quote of late. Reuters quotes an anonymous trader from India as saying, “There will be ‘understandable hesitancy’ among traders with the psychological level of 83 nearby.” The news also adds that It will "take a lot" for the rupee to fall below 83 toward a record low.
It should be noted that the latest weakness in oil prices also exerts downside pressure on the USD/INR due to India’s reliance on energy imports. While the economic slowdown fears were enough for the WTI crude oil to retreat from the weekly top, the downbeat China data and hopes of resumption of output from the Canadian oil pipeline seemed to have weighed on the black gold prices. That said, WTI crude oil remains mildly offered near $76.20 after snapping a four-day uptrend the previous day.
On Thursday, the US Dollar cheered risk-aversion as global central banks propelled benchmark rates in the latest monetary policy announcements and showed readiness to keep the rates higher for longer. On the same line was US President Joe Biden’s crackdown on Chinese chipmakers.
Given the lack of major catalysts and the market’s consolidation, the USD/INR may witness further pullback ahead of the US PMIs. That said, the market forecasts surrounding the US S&P Global PMIs appear mixed as Services activities are likely to improve but not the manufacturing ones. Even so, both these sectors are expected to print the below 50 figure that suggests a contraction in activities and could weigh on the US Dollar in case of a downbeat outcome.
Technical analysis
A daily closing beyond the 83.00 round figure becomes necessary for the USD/INR pair to stay on the bull’s radar.