- USD/INR seesaw around the highest in a week’s time.
- Political unrest in the capital, downbeat comments from IMF Chief Economist weakens the INR.
- Expectations of further government measures, including tax reliefs, check the pair’s upside.
USD/INR extends its retreat from the four-month lows while trading around 71.10 during early Wednesday. The pair have recently benefited from downbeat catalysts, geopolitical factors concerning India while the broad USD strength has also added strength to the quote.
The unrest over the citizenship bill in the Indian capital Delhi could be considered as the initial drawback for the pair. However, the major blow might have come from the International Monetary Fund’s (IMF) Chief Economic Gita Gopinath’s comments that the IMF will revise estimates for India’s economic growth in January, which will be a significant downward cut over the previous estimate.
On the contrary, a bounce in the Asian business sentiment, as per the Thomson Reuters/INSEAD poll seems to limit the Indian Rupee’s (INR) weakness. Also, Reuters’ news, which relies on sources, expecting government measures and tax cuts for individual taxpayers offered additional cap to the pair’s upside.
On the international front, upbeat comments from the US diplomats concerning the phase-one deal as well as further rolling back of tariffs from China seem to have helped the Asian currencies. Though, the US Dollar’s (USD) gains have been stronger based on the upbeat industrial production and housing market numbers from the US.
As a result, the risk-tone has been a bit brighter in Asia with the Indian equities rallying to record highs while the US 10-year treasury yields staying mostly unchanged near 1.88%.
Moving on, traders will keep eyes on today’s Goods and Services Tax (GST) Council meeting for fresh impulse. Additionally, the Federal Reserve (Fed) Governor Lael Brainard and the Federal Reserve Bank of Chicago President Charles Evan are also up for crossing the wires and will be observed closely as recent comments from the Fed officials have been upbeat.
Technical Analysis
A confluence of 100 and 50-day Simple Moving Average (SMA) near 71.23/25 acts as the key resistance holding the block towards the monthly trend line near 71.70. Alternatively, 70.35/30 including lows marked in September offers the strong support to watch.
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