USD/INR Price News: Indian rupee struggles to cheer RBI’s 50 bps rate hike near 77.70

• USD/INR remains pressured inside familiar trading range despite RBI’s 50 bps rate hike.
• RBI surpasses market forecasts by increasing the Repo Rate to 4.9%.
• Inflation fears, firmer oil prices exert downside pressure on the INR.
• Risk-aversion wave, US dollar strength ahead of key data/events keep bears hopeful.

USD/INR stays indifferent to the RBI’s rate increase during early Wednesday in Europe. In doing so, the Indian rupee (INR) pair seesaws around 77.70 by the press time.

Having been baffled by eight-year high inflation, the Reserve Bank of India (RBI) announces 50 basis points (bps) of a lift in the key Repo Rate to 4.9%. However, the Indian central bank left the Reverse Repo Rate unchanged at 3.35%.

Along with the rate hike, RBI Governor Shaktikanta Das mentioned that inflation has steeply increased much beyond the upper tolerance level. The policymaker also mentioned to remain focused on bringing down inflation closer to target. “Recovery in domestic economic activity remains firm,” adds RBI’s Das.

In addition to the growing inflation fears, the recent chatters surrounding global economic slowdown and the upbeat oil prices also challenge the USD/INR sellers. Furthermore, recovery in the US Treasury yields and anxiety ahead of Thursday’s European Central Bank (ECB) meeting, as well as Friday’s US Consumer Price Index (CPI) for May, favor the US dollar to remain firmer and favor USD/INR buyers.

That said, China’s Vice Commerce Minister Wang Shouwen joined China’s Vice Finance Minister Zou Jiayi to renew fears of global economic slowdown, as well as fears of receding demand. The policymakers were recently in agreement over a belief that the global demand growth is slowing. On the same line were comments from World Bank (WB) President David Malpass who warned that faster-than-expected tightening could push some countries into a debt crisis similar to the one seen in the 1980s seemed to have weighed on the quote of late.

Additionally weighing the market sentiment and favoring the USD/INR upside is the risk-negative news from Ukraine. “Kyiv says it has not yet reached any agreement with Russia or Turkey to allow the safe passage of its grain ships in the Black Sea, injecting skepticism into a push by the U.N. to create a vital food corridor,” per Politico.

It’s worth noting that India’s reliance on oil imports and the record deficit, as well as the exodus of foreign funds from the national market, provide extra strength to the USD/INR prices.

Amid these plays, the US 10-year Treasury bond yields rise two basis points (bps) to 2.99%, after snapping a six-day downtrend the previous day, whereas the S&P 500 Futures print the first daily loss in three around 4,140. Further, the US Dollar Index (DXY) reverses the pullback from a fortnight high while WTI crude oil prices seesaw around $120.00 after refreshing a three-month high earlier in the week.

Moving on, the market’s risk appetite appears the key catalyst for the USD/INR traders before ECB and the US CPI. Should the fears of faster/heavier rate hikes gain momentum, the Indian rupee pair can have further upside to witness.

Technical analysis

USD/INR remains pressured inside a three-week-old trading range between 77.80 and 77.35. However, the bulls appear running out of steam as RSI hints at receding bullish momentum. Hence, the USD/INR prices are likely to witness a pullback towards immediate support.