USD/INR Price News: Rupee prints three-day downtrend near 81.70 with eyes on India budget, Fed

• USD/INR picks up bids to extend the previous week’s rebound from 2.5-month low.
• RBI likely to announce 0.25% rate hike in February before ending tightening cycle.
• Fears of Adani stocks rout, firmer Oil price also weigh on Indian Rupee.
• Indian budget likely to emphasize deficit reduction, hopes of Fed’s dovish hike caps USD/INR upside.

USD/INR portrays a three-day uptrend around 81.70 as traders brace for the key data/events from India and the US during early Monday. Also likely to have underpinned the Indian Rupee (INR) pair’s run-up could be the pessimism surrounding the nation’s equities due to a company-specific move and fears of a downbeat budget for the Fiscal Year 2023-24 (FY).

Indian equities slumped to a three-month low after Adani group shares drowned the markets after the Hindenburg Research report triggered a $48 billion rout in shares of the top-tier Indian enterprise. Not only the equity rout but the likely exodus of foreign funds due to the Adani-led slump also weighs on the Indian Rupee (INR). Further, recently firmer prices of Crude Oil, mildly offered near $79.50 by the press time, also favors the USD/INR buyers.

On the contrary, mixed US data and cautious mood ahead of the Federal Reserve’s (Fed) monetary policy meeting decision probe the USD/INR bulls. During the last week, the Fed’s preferred gauge of inflation, namely the Core Personal Consumption Expenditures (PCE) Price Index, matched 4.4% YoY market forecast versus 4.7% prior while the monthly figure rose to 0.3% versus 0.2% expected and previous readings. Ahead of that, the US Bureau of Economic Analysis' (BEA) first estimate of the US fourth quarter (Q4) Gross Domestic Product marked an annualized growth rate of 2.9% versus 2.6% expected and 3.2% prior. On the same line, the Durable Goods Orders jumped 5.6% in December versus the 2.5% market forecast and -1.7% upwardly revised prior.

On a different page, China’s return from the one-week-long Lunar New Year (LNY) holidays bring some good news as the nation’s Center for Disease Control and Prevention (CDC) signaled the end of the Covid wave. On the same line could be the could jump in the Chinese festive demand, of around 12.2% versus the year ago, as well as readiness to bolster economic growth via lending tools, spending and higher imports.

Amid these plays, the US Treasury bond yields grind higher but the stock futures print mild losses. Furthermore, the Asia-Pacific shares grind higher but the US Dollar Index (DXY) struggles to extend a two-day recovery while India’s NSE 50 drops near 0.20% intraday at the latest.

Moving on, Wednesday becomes the key day for the USD/INR pair traders as Indian Finance Minister Nirmala Sitharaman will unveil the details of India’s Union Budget for the Fiscal Year 2023-24. Ahead of the release, Reuters said, “The Indian government will present a budget on February 1 that will likely put deficit reduction ahead of vote-winning spending, even as Prime Minister Narendra Modi looks towards seeking a rare third term of office in 2024.”

Additionally, the Reserve Bank of India is expected to raise its main interest rate by a modest 25 basis points to 6.50% at its meeting one week after New Delhi's budget, before leaving it at that level for the rest of the year, a Reuters poll of economists found. The same could keep the USD/INR buyers hopeful as policy pivot appears closer.

Moving on, USD/INR pair may witness further upside should the Indian budget updates disappoint the markets, which is more likely. However, the expected dovish hike from the Fed and likely weakness in the US Nonfarm Payrolls (NFP) may restrict the pair’s upside moves.

Technical analysis

The USD/INR pair’s successful trading beyond the 10-DMA, around 81.45 by the press time, keeps the buyers hopeful. However, the 100-DMA, close to 81.85 at the latest, holds the key to the bull’s dominance.