USD/INR pulls back from two-week high to sub-71.50 area despite coronavirus risk

USD/INR declines to the intra-day low of 71.40 as the Indian markets open for trading on Monday. The pair seems to have paid a little heed to the downbeat comments from the Moody’s and New Zealand PM Jacinda Ardern as signals from additional monetary/fiscal measures from China and Japan triggered the profit-booking moves of the Asian currencies.

In its latest update, the global rating giant Moody’s lowered its 2020/21 GDP forecasts for China as well as revised down G20 growth forecast to 2.4% for 2020. The global rating company also stated that coronavirus creates new risks to prospects of incipient stabilization of global growth this year resulting from truce in the US-China trade war.

Additionally, downbeat comments from New Zealand Prime Minister Jacinda Ardern and Japanese Economy Minister Nishimura also flashed worrisome signals off-late. Further, Bloomberg came out with the piece suggesting additional fiscal/monetary measures from China. Additionally, The People's Bank of China (PBOC) said it was lowering the rate of 200 billion yuan ($28.65 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions by 10 basis points (bps) to 3.15 percent from 3.25 percent previously.

At home, India’s WPI Inflation for January, released on Friday, crossed a 2.92% forecast to 3.10%.

Risk-tone remains mixed with major equities cheering expectations of further easing while fears of worst days ahead, due to coronavirus impact, cap the trade sentiment.

It should also be noted that the US markets’ off due to the President’s Day holiday and a lack of data/events at home also contribute to the pair’s latest pullback.

Technical Analysis

While 100-day SMA near 71.30 acts as the immediate support, January month high near 71.85 limits the short-term advances by the pair.