USD/INR Price News: Indian rupee drops back towards 77.00 amid holiday mood in Asia

• USD/INR rises the most in a week, grinds higher of late.
• Strong US Treasury yields, hopes of huge cash inflow favor buyers.
• US data, risk catalysts may entertain traders ahead of the key FOMC.
• Markets in China, Japan and India are off.

USD/INR holds onto the early Asian session gains around 76.75, grinding higher on Tuesday. The Indian rupee (INR) pair’s latest gains fail to justify the broad pullback in the US Dollar Index (DXY). The reason could be linked to the sluggish markets in Asia, as well as traders’ preparations for the likely heavy inflow into the Indian equity markets.

Holidays in China, Japan and India restrict market moves and allow the US dollar to consolidate recent gains. Even so, the greenback gauge remains on the front foot surrounding the 20-year high as the US Treasury yields stay strong heading into Wednesday’s Fed meeting.

Adding to the bullish bias for the USD/INR could be the hopes of heavy fund-flow from the Life Insurance Corporation of India’s (LIC) initial public offering, which in turn may help the INR to trim some of the latest losses.

It’s worth noting that the risk-off sentiment due to China’s covid-led lockdowns and escalation of the Russia-Ukraine crisis also underpin the USD/INR upside momentum.

That said, the pair’s short-term moves are likely to remain unaffected and may take clues from the US Factory Orders for March, expected at 1.1% versus -0.5% prior. However, major attention will be given to the Fed’s verdict amid hopes of a 0.50% rate hike and balance sheet normalization, not to forget Friday’s US jobs report for April.

Also read: Dollar rises in tandem with US yields before paring gains on recovery in US stocks

Technical analysis

10-DMA, Monday’s Doji keep USD/INR bulls hopeful to cross the 77.00 immediate hurdle and challenge April’s peak of 77.07. Alternatively, a downside break of the 10-DMA level surrounding 76.51 will need validation from the monthly support line, 76.40, to convince bears.