- USD/INR picks up bids to intraday high, reverses the previous day’s pullback.
- India reports the biggest daily drop in covid cases in three weeks.
- Firmer US Treasury yields challenge the pair sellers, US CPI eyed.
USD/INR remains on the front foot around 74.63, up 0.11% intraday, during early Tuesday. The pair began the week on a positive note before stepping back from 73.78. However, cautious mood ahead of the US Consumer Price Index (CPI) for August underpins the pair’s latest gains.
The fears of the Fed’s dialing back of the easy money policies were recently backed by the US second-tier employment releases and Producer Price Index (PPI), as well as comments from Philadelphia Federal Reserve Bank President Patrick Harker pushing for a sooner taper.
Additionally, Europe’s readiness for closer ties to Indo-Pacific nations to defend against Afghanistan after the US military evacuation joins the news concerning hurricanes and typhoons in the US Gulf Coast and China to weigh on the market sentiment.
On the positive side, India seems to recover from the darker days of the coronavirus infections as the active cases dropped by 12,062, the biggest single day fall since August 24, per the latest Government data. Furthermore, chatters surrounding China’s recently assertive relations with the Western leaders and hopes of faster vaccinations, as marked at the World Economic Forum, also challenge the US Dollar Index (DXY).
Against this backdrop, US 10-year Treasury yields regain 1.34% after a downbeat start to the week but stocks in Asia-Pacific remain pressured at the latest.
Looking forward, US inflation data will be closely observed for fresh impulse as the Fed is up for a monetary policy meeting the next week. Should the CPI justifies reflation fears, the US dollar may gain extra support from the likely risk aversion.
Read: US Inflation Preview: CPI critical for taper, three scenarios for the dollar
Technical analysis
FXStreet’s Ross J. Burland terms the USD/INR pair’s latest moves as lackluster while saying,
USD/INR is well and truly stuck in a range, trading between the 10 and 21 EMAs near the 38.2% Fibonacci retracement level following touch of the 50% mean reversion.
Read: USD/INR Price News: The Indian ruppee is stuck in a daily range
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