Market Awaits Key US Employment Data to set the Near-Term Direction of USD/INR

After registering a near 3-month low of 72.9175 on Wednesday, the USD/INR ended the day a tad higher at 73.08,  as the US cast doubts over global recovery from the covid-19 induced economic devastation which led to investors seeking the safe-haven dollar.  Analysts await key jobs data in the US on Friday, to decide on the direction of the currency pair.

The rally in domestic equities, dollar weakness, and regulatory curb by the  Chinese Government have led to more FII flows directing to India. Also, two Banks in India are planning to raise USD 1.54 billion through additional Tier-1 notes in foreign currency. Besides the dollar inflows, a record 20.1% Y-O-Y growth in April-June 2021 period and infrastructure output growth at 9.4% are supporting the rupee. In the absence of intervention by RBI, the next resistance for the rupee is at 72.80, while 73.50 remains strong support.

During the period from 31-12-20 to 31-8-21, BSE Sensex registered a sharp rise of 20.53% followed by gains of 18.72% in Taiwan Weighted Index and 11.36% in KOSPI, Hang Seng and Philippines Composite Index fell by 4.96% and 3.97% in the corresponding period. All the Asian currencies had depreciated against the dollar in the above period, except TWD and CNY which have appreciated by 1.50% and 1.47% respectively against the dollar. The Indian rupee was flat in the corresponding period.

It is interesting to note that during the January to August 2021 period, brent crude oil price was up by 38.5%. The 6-month forward dollar premium declined sharply by 0.84% per annum to reflect a forward rupee appreciation in the 6-month tenor by 0.92% per annum in the said period. Among the non-ferrous metallics, copper prices registered a rise of 22.84% in the period referred above.

The mild rebound in the dollar index from a 3-week low due to short-covering and a slight rise in US yields were seen today. The yield on the 10-year benchmark US T-note is currently trading at 1.3040%, as investors were cautious ahead of the release of data on employment which could provide clues on the course of the US Federal Reserve’s monetary policy.