While tracing the catalysts, India’s improving coronavirus conditions and the market’s optimism could be linked. As per the latest official figures, India’s daily covid counts and active COVID-19 cases fall to the lowest levels since May 2020. Also favoring the INR is the lowest covid-linked death toll since April 2020.
Elsewhere, Reuters quoted NewsRise while saying, “The Reserve Bank of India may look at intervening in non-deliverable forwards, instead of the onshore market, during Indian time so as not to impact rupee liquidity and simultaneously reverse arbitrary trades, State Bank of India’s economic research unit said.”
On the same line was the recently easing Foreign investment outflow. In this regard, NewsRise quotes an anonymous bank trader while saying, “These investors net sold bonds worth INR8 billion last week, sharply lower from INR39 billion in the previous week; but bonds maturing up to 2028 seeing major outflows.”
On a different page, lack of clarity over the Ukraine-Russia crisis and China’s multi-day high covid numbers challenge the market’s risk-on mood, which in turn could favor USD/INR buyers. Also likely to propel the pair prices could be the record-high US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve data.Technical analysis
The USD/INR pairs’ latest pullback needs validation from the December 2021 peak of 76.59 to convince sellers. Even so, the 10-DMA level surrounding 76.37 challenges the pair bears. That said, bulls may wait for a clear upside break of the 77.00 to retake control.