- USD/INR has dropped to near 81.00 as the Fed has confirmed the moderation of policy tightening.
- The US Dollar has faced immense pressure on less-hawkish Fed commentary and weaker US ADP Employment data.
- Gains in the Indian rupee could remain capped due to firmer oil prices.
The USD/INR pair has witnessed intense selling pressure at open as the risk aversion theme has vanished entirely. The asset has dropped to near the round-level support of 81.00 amid a sharp sell-off in the US Dollar Index (DXY). The pair has continued its three-day losing streak and has refreshed its two-week low at 81.03.
Meanwhile, the USD Index has turned lackluster after dropping to near 105.50. S&P500 futures are holding their Wednesday’s gains and showing no signs of exhaustion. The 10-year US Treasury yields are showing a minor recovery after dropping to near 3.60%. The US Treasury bonds have received significant interest from the market participants as Fed Powell’s commentary bolstered rate hike slowdown chatters.
As the Federal Reserve (Fed) has decided to consider economic prospects too along with the foremost priority of bringing price stability, the US Dollar might lose its dictatorship ahead.
Going forward, investors will focus on the United States Nonfarm Payrolls (NFP) data, which will release on Friday. The official payrolls report could disclose subdued employment generation if the US Automatic Data Processing (ADP) Employment data is being considered. Apart from that, average earnings data also holds significant importance.
After containing galloping perishable and durable goods prices, higher earnings will create troubles for the Fed policymakers. Post a slowdown in inflation led by accelerating interest rates, households will remain with higher earnings that could trigger retail demand.
On the Indian rupee front, aggressive buying in Indian equities is indicating robust buying by Foreign Institutional Investors (FIIs), which is strengthening the Indian rupee. The Indian rupee rally is expected to remain capped as oil prices have soared vigorously led by three consecutive drawdowns in oil inventories reported by the US Energy Information Administration (EIA).
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