- USD/INR remains on the back foot near the monthly low after posting the heaviest weekly fall since late December.
- News of Biden-Putin summit joins Blinken-Lavrov talks to underpin hopes of Ukraine diplomacy and drags USD.
- India’s daily covid infections drop to December 30 levels, bond selling by foreign investors slows down after MPC.
- Preliminary PMIs for February, US PCE Inflation data will decorate weekly calendar, Russia-Ukraine developments are the key.
USD/INR refreshes intraday low to 74.53, down 0.15% on a day during early Monday morning in Europe.
The cross-currency pair printed the biggest weekly fall by the end of Friday amid broad US dollar weakness. The recent declines targeting the monthly low mainly cheer the market’s risk-on mood backed by hopes of Ukraine diplomacy. Also supporting the pair sellers is the improving covid conditions in India, as well as the recently softer pace of the Indian bond selling by the foreign investors.
US Dollar Index (DXY) snaps two-day rebound with 0.26% intraday losses, around 95.85 by the press time, as the market’s optimism concerning the Ukraine-Russia issue weighs on the greenback. Also challenging the USD were the recently downbeat comments from the Fed policymakers.
With US President Joe Biden agreeing for a summit over Ukraine and including Russian counterpart Vladimir Putin, global traders got another reason to expect a soon diplomatic easing of Russia-Ukraine tensions. During the last week, US Secretary of State Antony Blinken agreed to talk with Russian Foreign Minister Sergei Lavrov and raised the hope of a solution to the key market problem on hand.
Elsewhere, Chicago Fed President and FOMC member Charles Evans said on Friday that the current Fed policy had been "wrong-footed" in the face of high inflation, but may not need to become restrictive. On the other hand, New York Federal Reserve Bank President John Williams and the No. 2 official on the Fed’s policy-setting panel mentioned, "I don’t see any compelling argument to taking a big step at the beginning."
At home, India reported 16,051 daily covid cases on early Monday, the lowest since December 30. Also favoring the Indian rupee (INR) buyers is the update from NewsRise that quotes an anonymous trader with a foreign bank saying, “There was heightened negativity for a few sessions following the budget announcement, which led to outflows from government bonds, especially the trading money. However, after the policy things seem to be consolidating.”
Against this backdrop, stock futures remain firmer and the US Treasury yields keep the previous week’s pullback from a 2.5-year high.
Looking forward, preliminary readings of February month’s PMI figures will join the Fedspeak and Core PCE Price Index, the Fed’s preferred inflation reading, to decorate the calendar. However, risk catalysts will be more important for clear directions.
Technical analysis
A clear downside break of a five-week-old ascending trend line joins the impending bear cross to keep the USD/INR sellers hopeful. However, the 200-DMA level of 74.35 becomes crucial support to watch during the quote’s further decline.