USD/INR Price News: Indian rupee pares US inflation-led losses near 74.50

• USD/INR eases from weekly top after two-day uptrend.
• US inflation jumps to a 31-year high in October, fuels Fed rate hike concerns.
• News from China’s Evergrande tests pair buyers amid a sluggish session.

USD/INR retreats from one week high to 74.40 heading into Thursday’s European session. In doing so, the Indian rupee (INR) pair tests the buyers after a two-day uptrend while also challenging the previous day’s gains, due to the strong US Consumer Price Index (CPI) data. The reason could be linked to the recent consolidation in the market sentiment.

Risk appetite improves after the US inflation data blew optimists the previous day, underpinned the US Treasury yields and the US dollar. That said, the headlines CPI jumped to a three-decade high of 6.2% YoY and bolstered Fed rate hike expectations.

Following that, mixed comments from the Fed policymakers seemed to have placated the bears. Patrick Timothy Harker and Mary C Daly, respective Presidents of the Federal Reserve Bank of Philadelphia and San Fransisco, tried to defend the Fed doves. Mr. Harker highlighted the possibilities of a rate hike even while tapering is on whereas Fed’s Daly said, per Reuters, that it would be premature to change the calculation on raising rates.

Elsewhere, news that China’s Evergrande made interest payment to the tune of $148 million on Wednesday, avoiding a default third time in the line, also favored the mild risk-on mood amid the quiet markets.

Alternatively, not-so-positive comments from US Trade Representative (USTR) Katherine Tai citing weakness in China’s phase 1 performance test the optimists ahead of next week’s virtual summit of US President Joe Biden and his Chinese counterpart Xi Jinping. On the same line were India’s latest covid updates citing the biggest daily jump in infections since October 30, 13,091 versus 11,466 reported the previous day.

It’s worth noting that the US banking holiday restricts bond market moves and hence backs the latest consolidation in the markets, allowing stock futures and Asian equities to lick their wounds.

However, the Fed rate hike risk remains on the table while the Reserve Bank of India (RBI) hasn’t yet shown any sign of monetary policy tightening, which in turn keeps the USD/INR buyers hopeful.

Technical analysis

A bullish crossover of the 50-DMA to the 100-DMA joins a steady RSI line to direct USD/INR buyers towards a monthly resistance line near 74.95. Alternatively, the stated DMAs restrict immediate downside around 74.35-30.