- USD/INR takes the bids to refresh intraday high, reverses Friday’s pullback.
- RBI says India on course to become world’s fastest-growing economy.
- Hawkish Fed bets ease on mixed US data, cautious Fedspeak.
- Absence of Fedspeak, major data also allows USD to pare recent gains.
USD/INR renews intraday high around 79.80 during the initial hours of Monday’s Asian session. In doing so, the Indian rupee (INR) pair fails to cheer RBI’s upbeat expectations, as well as a reduction in the market’s hawkish concerns surrounding the US Federal Reserve (Fed).
That said, Reuters came out with the news while quoting the Reserve Bank of India’s (RBI) statement published on Saturday. “India’s economy has remained resilient in the face of global headwinds and with inflation coming off its recent peak is expected to stay on course to become the world’s fastest-growing economy,” said the RBI.
The RBI Bulletin also mentioned that the recent revival of the southwest monsoon and renewed planting raised expectations that rural demand will soon catch up with urban spending and consolidate a recovery.
On the other hand, the US Dollar Index (DXY) extends Friday’s losses to 107.93, down 0.08% intraday, as traders curtail hawkish calls over the Fed’s next move. Behind the moves could be the recently mixed US data and slightly cautious Fedspeak.
It’s worth noting that the US Index of Consumer Expectations declined to its lowest level since May 1980 while flashing 47.3 at the latest. The reductions in the US inflation expectations joined downbeat US Industrial Production for June, down to -0.20% MoM, as well as pessimistic economic forecasts for Q2 by the US Atlanta Fed’s GDP, also weigh on the US dollar. That said, the Atlanta Fed GDPNow release bolstered recession fears after the estimate for 2Q growth is coming in at -1.5% versus -1.2% last.
On a different page, Atlanta Fed President Raphael Bostic said on Friday that June’s 75 basis points rate hike was a “big move” and added that the Fed wants policy transition to be orderly, as reported by Reuters. Further, San Francisco Fed President Mary Daly said on Friday that the “Fed is working on getting down inflation without stalling economy.” Additionally, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn’t make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting. In this regard, Wall Street Journal’s (WSJ) Nick Timiraos also came out with a piece that turned down the market’s expectations of a 1.0% Fed rate hike.
Amid these plays, US stock futures and Asia-Pacific shares track Wall Street’s gains to portray cautious optimism in the market and weigh on the US dollar. However, doubts about the RBI’s optimism join comparatively more hawkish Fed than the Indian central bank to keep USD/INR buyers hopeful.
Despite the latest rebound, USD/INR needs a daily closing beyond a three-week-old resistance line, around 80.00 by the press time, to keep buyers hopeful. Until then, the overbought RSI hints at a pullback towards the monthly support line near 79.50.