USD/INR Price News: Indian rupee bounces off three-week low on RBI, coronavirus chatters

• USD/INR retreats from early-November high during four-day uptrend.
• India’s active covid cases drop to the lowest in 537 days, talks over RBI rate hike escalate.
• DXY tracks softer Treasury yields as markets brace for key US data/events.

USD/INR steps back to 74.45, following a run-up to the fresh fortnight high marked during early Wednesday. The Indian rupee (INR) buyers cheer the Asian nation’s strong vaccinations and hopes of a rate hike by the Reserve Bank of India (RBI), not to forget the broad pullback in US Treasury yields, while portraying the latest pullback of the pair.

With over 100 billion covid jabbings, India’s latest active infections drop to the lowest in 537 days, per official data. Even so, the virus-led death toll rises past 236 reported yesterday to 437 at the latest.

Given the vaccination-led economic recovery and recently positive fundamentals, INR traders expect the RBI to announce a rate hike during the next week. “With the GDP data coming out next week, growth-inflation dynamics will be key in determining RBI's decision on the timing of the first reverse repo rate hike," said Upasna Bhardwaj, an economist at Kotak Mahindra Bank per Reuters.

Elsewhere, the US 10-year Treasury yields drop 2.2 basis points (bps) to 1.638% whereas the S&P 500 Futures drop 0.25% by the press time. Further, the US Dollar Index (DXY) dribbles around a 16-month high and the gold prices consolidate recent losses amid the market’s cautious mood ahead of the key US data/events.

It’s worth noting that the DXY refreshed the 16-month high the previous day amid higher odds of the Fed rate hike, backed by US President Joe Biden’s Fed nominations and a recent jump in the US inflation expectations.

Among the key US catalysts, October month’s Durable Goods Orders, the second estimate of the Q3 US Gross Domestic Product (GDP), the latest FOMC Meeting Minutes and October’s core PCE inflation are crucial for the market players to watch. USD/INR bears will be more interested in witnessing the coronavirus-led challenges to the scheduled data/events.

Technical analysis

A daily closing beyond a downward sloping trend line from October 12, around 74.62, becomes necessary for the USD/INR bulls to keep reins. Alternatively, pullback moves may aim for the 200-DMA re-test, near 73.90 by the press time.