- USD/INR snaps two-day winning streak while refreshing intraday low.
- Broad US dollar weakness, recently positive fundamentals from India favor bulls.
- RBI is expected to stand pat but growth and inflation projections will be eyed closely.
USD/INR drops to 73.80, down 0.10% intraday, ahead of the Reserve Bank of India’s (RBI) interest rate decision on Friday. In doing so, the pair drops for the first time in the last three days amid hopes of no change in the RBI’s current monetary policy, as well as an upward revision to the growth and inflation projections for the current fiscal year.
While the recovery in the Q2 GDP and price measures suggest upward revision of the key economic forecasts, chatters concerning the Indian central bank’s liquidity policy also weigh on the pair. A sharp drop in the Indian Treasury Bill yields versus the benchmark 10-year Government Securities marked a steeped yield curve, which in turn suggests further liquidity measures. Though market players are divided over the same and hence the bulls are having an upper hand.
Ahead of the RBI rate decision, up for publishing at 06:15 GMT, Deutsche Bank said, “Upside surprises to recent high-frequency data and progress on the vaccine front should keep RBI on the sidelines, while slowly shifting its attention to inflation management.”
On the same line, TD Securities said, “We only expect easing once there is evidence that inflation is softening, with a cut likely in February 2021.”
Other than the RBI chatters, broad US dollar weakness and the risk-on mood pleases the USD/INR bears. The US dollar index (DXY) dropped to 90.51, the fresh low since April 2018 the previous day, currently around 90.68.
Risk barometers like S&P 500 Futures and Asia-Pacific shares remain mildly positive but the US 10-year Treasury yields dwindle amid vaccine hopes and the US-China tussle.
Looking forward, RBI becomes the key event for the pair before the US employment report for November. Although the RBI’s status-quo may fail to provide any clear direction to the USD/INR pair traders, the Indian central bank’s take on the growth and inflation figures will be the key to watch. Any upbeat analysis, which is most likely, can exert additional downside pressure on the quote.
Read: Nonfarm Payrolls Preview: Another dollar’s disappointment underway
Technical analysis
A confluence of 10-day and 50-day SMA near 73.85/90 restricts the pair’s short-term upside ahead of a falling trend line from November 13, at 74.00 now. As a result, odds of the pair’s drop to the monthly low near 73.40 can’t be ruled out.
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
USD/JPY pops and drops on BoJ's expected hold
USD/JPY reverses a knee-jerk spike to 142.80 and returns to the red below 142.50 after the Bank of Japan announced on Friday that it maintained the short-term rate target in the range of 0.15%-0.25%, as widely expected. Governor Ueda's press conference is next in focus.
AUD/USD bears attack 0.6800 amid PBOC's status-quo, cautious mood
AUD/USD attacks 0.6800 in Friday's Asian trading, extending its gradual retreat after the PBOC unexpectedly left mortgage lending rates unchanged in September. A cautious market mood also adds to the weight on the Aussie. Fedspeak eyed.
Gold consolidates near record high, bullish potential seems intact
Gold price regained positive traction on Thursday and rallied back closer to the all-time peak touched the previous day in reaction to the Federal Reserve's decision to start the policy easing cycle with an oversized rate cut.
Ethereum rallies over 6% following decision to split Pectra upgrade into two phases
In its Consensus Layer Call on Thursday, Ethereum developers decided to split the upcoming Pectra upgrade into two batches. The decision follows concerns about potential risks in shipping the previously approved series of Ethereum improvement proposals.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.