USD/INR: Rupee may gap higher on dovish Fed

  • USD/INR is likely to open on a negative note, tracking overnight losses in the US dollar. 
  • Fed kept rates unchanged but cited high inflation as a prerequisite for rate hikes. 

Indian Rupee (INR) is likely open higher on Thursday, tracking the overnight gains in the major currencies following the Federal Reserve’s rate decision. 

The US central bank kept rates unchanged at 1.5%-1.75% and signaled it would stand pat in 2020. Even so, markets offered US dollars, possibly due to comments by President Powell that rates would be hiked only if there a persistent rise in inflation. 

EUR/USD rose above key resistance at 1.1116, confirming a bullish breakout. The British Pound and the Japanese Yen also gained ground against the greenback. Notably, GBP/USD is currently trading at fresh nine-month highs near 1.3225. 

AUD/USD and NZD/USD are also better bid at press time, having gained 1% and 0.62%, respectively on Wednesday. 

As a result, Rupee is likely to open on a positive note, pushing USD/INR to levels below 70.60. The downside momentum may weaken if Yuan continues to lose ground on trade tensions. The Chinese currency has not benefitted much from the Fed’s dovish tone. At press time, the USD/CNH pair (offshore Yuan) is sidelined around 7.0267. 

Technical levels

With the daily chart reporting a downside break of an ascending trendline and bearish readings on key indicators, the currency pair looks set to test support at 70.31 (Nov. 1 low). 


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