- USD/INR rises on broad-based USD strength on Monday.
- Federal fiscal deficit in India declines in December.
- RBI is scheduled to announce its interest rate decision on Thursday.
The USD/INR pair gained traction on Monday and advanced to its highest level since mid-December at 71.91 before correcting a small part of its daily upsurge. As of writing, the pair was up 0.35% on the day at 71.72.
Although the data from India earlier today showed that the federal fiscal deficit declined slightly in December, markets remained focused on the USD and made it difficult for the INR to grab investors' attention.
After posting small gains on Friday, the US Dollar Index started the new week on a strong note and continued to reverse the losses it suffered following the dovish shift in the FOMC's tone last Wednesday. The impressive growth in the nonfarm payrolls and strong manufacturing PMI data from the U.S. helped the buck gather strength. The DXY inched closed to the 96 handle today and was last up 0.25% on the day at 95.84.
On the other hand, the INR could continue to have a tough time finding demand ahead of this week's RBI meeting. Previewing the event, "At the Reserve Bank of India’s sixth bi-monthly monetary policy meeting for 2018-19 scheduled for Thursday 7th February we expect the RBI to keep its repo rate unchanged at 6.50% but change its stance to “neutral” from “calibrated tightening”. While there is a non-insignificant risk of a rate cut under new governor Das, we think it may be premature for the RBI to ease at this time," said TD Securities analysts in a recently published report.
Furthermore, TD Securities analysts also note that the INR is one of the worst performing EM currencies against the USD so far in 2019 amid concerns over fiscal slippage ahead of the elections. On the same note, "The policies of the Gujarati-born PM trigger some negative reactions from investors who worry about slippages in the budget and weigh on the Indian rupee. The so-called "Modinomics" that economists liked may be turning against the rupee," argued FXStreet Analyst Yohay Elam.
- USD/INR Forecast: 3 reasons for the fall of the Rupee, levels to watch.
Technical outlook
USD/INR Technical Analysis: Bullish while above 71.50, looking at 72.00.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to modest gains above 1.0650 ahead of US data
EUR/USD trades modestly higher on the day above 1.0650 in the early American session on Tuesday. The upbeat PMI reports from the Eurozone and Germany support the Euro as market focus shift to US PMI data.
GBP/USD extends rebound, tests 1.2400
GBP/USD preserves its recovery momentum and trades near 1.2400 in the second half of the day on Tuesday. The data from the UK showed that the private sector continued to grow at an accelerating pace in April, helping Pound Sterling gather strength against its rivals.
Gold flirts with $2,300 amid receding safe-haven demand
Gold (XAU/USD) remains under heavy selling pressure for the second straight day on Tuesday and languishes near its lowest level in over two weeks, around the $2,300 mark in the European session. Eyes on US PMI data.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
US S&P Global PMIs Preview: Economic expansion set to keep momentum in April
S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity.