- USD/INR extends Friday’s losses amid risk-off mood, mixed performance of USD.
- RBI matched wide market forecasts of inaction, conveyed inflation risks due to covid-led supply crunch.
- G7 proposal enables India to levy 20% taxes on MNC without presence, APEC backs smooth movement of covid goods, services.
- Market sentiment dwindles amid uncertainty over Fed’s next moves.
USD/INR refreshes intraday low to 72.78, down 0.16% intraday, amid the initial Indian trading session on Monday. In doing so, the Indian rupee (INR) pair ignores the US dollar’s recovery moves amid upbeat fundamentals at home.
Starting with the latest updates from the Group of Seven (G7), the global leaders proposed to allow India to charge 20% on the Multi-National Companies (MNCs) without having a physical presence in the nation. However, the proposal is likely to be challenged by the low-tax jurisdictions and looms until the G20 meeting in July in Venice.
On the same line could be the Reserve Bank of India’s (RBI) status-quo and confidence that the supply crunch during the coronavirus (COVID-19) is the risk to the economy while also citing upbeat expectations moving forward. The Indian central bank kept the benchmark repo rate unchanged at 4.0% while also keeping the reverse repo rate intact near 3.35%.
It’s worth noting that the market’s risk appetite wanes amid doubts over the upcoming US Federal Reserve (Fed) monetary policy meeting. Following Friday’s surprisingly downbeat NFP, market players were cheering the receding odds of the tapering. However, weekend comments from US Treasury Secretary Janet Yellen signaled that the higher rates are good for the Fed, which in turn renewed the risk-off mood.
Adding to the sluggish mood were chatters over US Secretary of State’s vow, per Axios, to hold China accountable for covid origin, as well as fears that China’s fading recovery is an early signal for the global movement after taming the virus.
Against this backdrop, US 10-year Treasury yields gain 1.2 basis points (bps) to 1.57% while S&P 500 Futures drop 0.15% by the press time.
Looking forward, a lack of major catalysts may keep the inflation and covid headlines on the driver’s seat for the near-term USD/INR moves.
Technical analysis
Failures to cross 21-day SMA near 73.00, not to forget pullback from monthly resistance line around 73.20, keep USD/INR sellers hopeful.