- Dovish RBI commentary weighs on INR on Monday.
- PMI data from US points to ongoing expansion in manufacturing activity.
- US Dollar Index looks to post daily losses after Friday’s upsurge.
Boosted by the USD’s impressive performance on Friday, the USD/INR staged a decisive recovery but registered weekly losses for the second straight week. With the INR coming under modest bearish pressure during the European trading hours on Monday, however, the pair pushed higher and tested the 71 handle. As of writing, the pair was up 0.15% on the day at 70.90.
INR weakens after RBI’s Das’ remarks
Earlier in the day, Reserve Bank of India (RBI) Governor and MPC Chair Shaktikanta Das opened the door for possible rate cuts and weighed on the INR. “While taking a pause, we very carefully and very definitely said there is space for further monetary policy action,” Das said. “The timing will have to be decided in a manner that its impact is optimum and the impact is maximized.”
In the meantime, the WPI inflation in India came in at 0.58% on a monthly basis in November to fall short of the market expectation of 0.74%.
On the other hand, although the US Dollar Index (DXY) fell below the 97 mark during the early trading hours of the American session on Monday and made it difficult for the pair to stretch higher, the PMI data helped the currency recover its losses. At the moment, the DXY is still down 0.07% at 97.11.
The preliminary data published by the IHS Markit revealed that the economic activity in both the manufacturing and the service sector continued to expand at a healthy rate in December. The Manufacturing PMI and the Services PMI came in at 52.5 and 52.2, respectively.
Technical levels to watch for
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