- USD/INR reverses the early Asian run-up following’s RBI’s status-quo.
- RBI Governor Das cites enhanced and targeted policy support for exports as the need of an hour, cuts GDP forecast.
- US dollar remains bid on safe-haven demand amid tapering woes.
- US NFP, Fed’s Powell and President Biden’s speech will be the key event of the day.
The Reserve Bank of India’s (RBI) refrain from strong policy measures dragged USD/INR from intraday top to 72.98, down 0.06% on a day, amid Friday’s initial Indian trading session. In doing so, the Indian rupee (INR) pair prints the first daily loss in five.
The RBI kept the benchmark repurchase rate (repo) unchanged at 4.0%, as well as holding the reverse repo rate intact around 3.35%, widely matching market expectations, by the end of a three-day monetary policy meeting on Friday. It’s worth noting that the Indian central bank announced INR 160 billion special liquidity facility for the Small Industrial Development Bank of India (SIDBI) to help Medium, Small and Micro Enterprises (MSME).
Following the rate decision, RBI Governor Shaktikanta Das said, “The inflation print for April at 4.3% has brought with it some relief and policy elbow room.” Further, the RBI Boss Das downgrades FY2021-22 GDP forecast to 9.5% while expecting CPI to be around 5.1% during the stated period.
Despite the absence of the RBI’s strong fight against the pandemic, USD/INR sellers seem to have cheered the confidence of Governor Das while taking qualitative measures to tame the pandemic-related economic losses.
On the other hand, market sentiment remains sluggish during the aftermath of the US data suggesting reflation woes, also fueling the tapering expectations. The same put a safe-haven bid under the US dollar.
However, cautious sentiment ahead of today’s key US Nonfarm Payrolls (NFP) keeps traders divided. Also important will be the US President Joe Biden’s speech and comments from Fed Chair Jerome Powell as USD/INR traders will seek clues to justify tapering fears, which in turn could recall the pair buyers if matching market consensus.
Read: US May Nonfarm Payrolls Preview: Analyzing major pairs' reaction to NFP surprises
Technical analysis
USD/INR pullback from 21-day SMA, around 73.06, favors further pullback towards 72.80 immediate support. Though, any further downside will have a bumpy road to the yearly bottom surrounding 72.15-20. Meanwhile, an upside clearance of 73.06 won’t offer a fresh pass to the pair buyers unless crossing 100-day SMA near 73.30.