USD/INR Trading Flat Ahead of Powell's Speech at Jackson Hole Symposium

USD/INR opened the day a lot lower at 74.18 registering a gain of 3 paise/USD, as the 10-year yield fell slightly to trade currently at 1.3440%. The local stocks are currently trading higher close to the all-time highs recorded this week and the currency pair is trended lower while its support is firmly in place at 74.10.

Analysts worldwide now await the Federal Reserve’s Jackson Hole symposium which ends today and they expect the comments to provide cues on the timing of tapering of monetary stimulus. The rupee is now trading a shade stronger against the dollar on the view that the Delta variant of covid-19 may not derail the economic recovery.

Currently, sentiment on the rupee is biased on the upside and no major triggers are expected to break the range of 74.00 to 74.50. While the dollar inflows from IPOs/QIPs are driving the rupee to break the 74 resistance but the intervention fears from RBI shall contain the rupee’s support at 74.50. Amidst the solid export growth expected in the current fiscal, RBI has remained intolerant to any appreciation in the rupee exchange rate beyond the 74 levels on a sustainable basis. Over the medium-term, the rupee is expected to decline to 75.30-75.50 level due to possible rise in global oil prices and the Fed tapering timeline anticipated in the next 3 months period or so from now.

The Finance Minister said on Wednesday the Government seeks to stir economic growth through sustained credit push while directing the State-run Banks to undertake a nationwide loan outreach program around October focusing on covid-hit small and medium businesses in the retail and farm sectors amid fears that Bankers have turned risk-averse.

Chinese stocks were under pressure as traders reacted to Beijing’s crackdown on private industries. The PBOC on Wednesday increased its short-term fund injection through open market operations to ease worries over tightening liquidity as China’s economic recovery is slowing. KOSPI shares fell by 0.56% on Wednesday after the country’s central bank hiked interest rate by 25 bps to 75 bps now, the first central bank in Asia to commence exiting record-low borrowing costs.

The 10-year US yield fell slightly after touching a 2-week high of 1.3750% overnight as investors are getting more confident the Federal Reserve will delay a stimulus reduction amid weak economic data and worries over the spread of the coronavirus Delta variant. The yield fell by 3 bps overnight to currently trade at 1.3440%.