- USD/INR has come out of the woods ahead of the Indian Union Budget announcement.
- The USD Index has rebounded as anxiety among investors has soared ahead of the Fed’s monetary policy.
- Consideration of a lower Fiscal Deficit and higher taxes in the Indian Union Budget could strengthen the Indian rupee.
The USD/INR pair has delivered an upside break of the consolidation formed in a narrow range of 81.66-81.77 in the Asian session. The asset is demonstrating optimism amid a recovery move shown by the US Dollar Index (DXY) after dropping to near 101.70.
Investors are getting anxious ahead of the interest rate decision by the Federal Reserve (Fed), therefore, the USD Index is fetching traction. The risk-averse theme is getting popular despite the being widely anticipated that the Fed will hike interest rates by 25 basis points (bps). S&P500 futures have faced immense pressure in the Asian session despite being heavily demanded on Tuesday. The alpha generated by the 10-year US Treasury bonds has dropped to 3.51%.
Apart from the Fed’s monetary policy, the release of the United States Automatic Data Processing (ADP) Employment data carries significant importance. According to the consensus, the US economy has generated fresh 170K jobs in January vs. the former release of 235K. Higher interest rates by Fed chair Jerome Powell to tame inflation have trimmed the demand for borrowings by corporate, which has led to a decline in the labor demand.
On the Indian rupee front, investors are awaiting the announcement of the Union Budget FY2023-24 by Indian Finance Minister Nirmala Sitharaman for fresh impetus. Consideration of lower Fiscal Deficit management and higher taxes by the Indian administration could strengthen the Indian rupee.
Meanwhile, the oil price is looking to extend its recovery above the immediate resistance of $79.50. Soaring expectations for higher oil demand amid a sheer economic recovery in China have strengthened the oil price. It is worth noting that India is one of the leading importers of oil and higher oil prices impact the Indian Rupee.
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