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USD/INR Softer In Early Trade, But Rupee Lagging Softer USD Trend

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USD/INR has opened trading at 81.78/80, ~0.2% lower than yesterday's closing levels, as dealers digest Fed Chair Powell's comments yesterday after the Fed raised interest rates by 25bps.

  • In yesterday's Indian budget the Govt cut personal income taxes to boost consumption, whilst increasing infrastructure spending. The govt will borrow ~15.4tn Rupee to fund the spending plan.
  • On the wires yesterday we also had S&P Global Mfg PMI printing at 55.4, a fall from the prior reading of 57.8.
  • On Jan 31 Global Investors bought a net $204.1mn of bonds, the most since 16 Sep. Such flows may continue post the budget as the market seemed happy with the lower than expected borrowing plan for the coming fiscal year.
  • Selling pressure from Global Investors continued on Indian Equities with ~$570mn sold. the early tone on equities is softer today, bucking the positive trends elsewhere. Adani headlines continue to dominate this space.
  • USD/INR continues to consolidate, the pair is dealing a touch below its 20-day EMA today. Bulls look to break 82, whilst bears target 100-day EMA at 81.51. INR continues to lag the broader positive trend seen for the ADXY, see the chart below.

Fig 1: USD/INR & ADXY (Inverted) Trends

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USD/INR has opened trading at 81.78/80, ~0.2% lower than yesterday's closing levels, as dealers digest Fed Chair Powell's comments yesterday after the Fed raised interest rates by 25bps.

  • In yesterday's Indian budget the Govt cut personal income taxes to boost consumption, whilst increasing infrastructure spending. The govt will borrow ~15.4tn Rupee to fund the spending plan.
  • On the wires yesterday we also had S&P Global Mfg PMI printing at 55.4, a fall from the prior reading of 57.8.
  • On Jan 31 Global Investors bought a net $204.1mn of bonds, the most since 16 Sep. Such flows may continue post the budget as the market seemed happy with the lower than expected borrowing plan for the coming fiscal year.
  • Selling pressure from Global Investors continued on Indian Equities with ~$570mn sold. the early tone on equities is softer today, bucking the positive trends elsewhere. Adani headlines continue to dominate this space.
  • USD/INR continues to consolidate, the pair is dealing a touch below its 20-day EMA today. Bulls look to break 82, whilst bears target 100-day EMA at 81.51. INR continues to lag the broader positive trend seen for the ADXY, see the chart below.

Fig 1: USD/INR & ADXY (Inverted) Trends

Keep reading...Show less