USD/INR Price News: Indian Rupee extends post RBI gains as US Dollar retreats despite hawkish Fed talks

• USD/INR remains pressured for the second consecutive day amid broad US Dollar weakness.
• RBI rejects dovish hike concerns even as matching market forecasts of 0.25% rate hike.
• Cautious optimism in Asia, downbeat US Treasury bond yields favor Indian Rupee buyers.

USD/INR fades bounce off intraday low as Indian Rupee buyers cheer cautious optimism in Asia, as well as a softer US Dollar, during early Thursday. In doing so, the pair sellers extend the Reserve Bank of India (RBI) inflicted losses to around 82.60 by the press time.

Market sentiment in Asia improves amid the risk-positive headlines surrounding China. That said, the receding fears of the US-China jitters, following the China balloon shooting by the US, join hopes of People’s Bank of China’s (PBOC) rate cuts and the restart of the China-based companies’ listing on the US exchanges to favor risk-on mood in the bloc.

Additionally favoring the sentiment could be the receding recession woes surrounding China and the US. On Wednesday, global rating giant Fitch inflated China's growth forecasts while US Treasury Secretary Janet Yellen and President Joe Biden recently cheered hopes of growth in the current year.

It should be noted that the RBI’s rejection of the market’s dovish hike expectations, by suggesting high inflation fears, also seems to weigh on the USD/INR prices. Following the RBI’s 0.25% hawkish move, analysts at ING and Citibank expect another 25 bps rate hike.

Alternatively, hawkish Fedspeak, including Fed Governor Christopher Waller, New York Federal Reserve President John Williams and Fed Governor Lisa Cook, highlight inflation fears and defended higher rates, while also pushing back the talks of rate cuts in 2023. On the same line were comments from the US diplomats as Treasury Secretary Janet Yellen mentioned, “While inflation remained elevated, there were encouraging signs that supply-demand mismatches were easing in many sectors of the economy.” Elsewhere, US President Joe Biden said during a PBS interview that there will be no US recession in 2023 or 2024.

Amid these plays, the US 10-year Treasury bond yields which reversed from a one-month high to snap a three-day uptrend on Wednesday, pressured around 3.61% at the latest. The same helped S&P 500 Futures to ignore Wall Street’s downbeat closing and remain mildly bid as of late.

Given the cautious optimism in the market and the US Dollar’s failure to justify hawkish Fed bias, the USD/INR pair may witness recovery if the US Weekly Jobless Claims keep portraying a strong US labor market. Also, fears of more Sino-American tussles and higher Fed rates may allow the Indian Rupee (INR) to pare RBI-inspired gains.

Technical analysis

USD/INR bears need validation from a convergence of the 100-DMA and a two-week-old ascending support line, close to the 82.00 round figure by the press time, to retake control.