USD/INR skids below 76.00 on the underperformance of DXY and falling oil prices

• USD/INR has plunged below 76.00 as DXY weakens on higher demand for risk-sensitive assets.
• Falling oil prices have appreciated the Indian rupee.
• DXY has also been hammered ahead of poor US NFP.

The USD/INR pair is on the verge of auctioning below the previous week’s low at 75.95 as the mighty greenback surrendered sufficient gains on Tuesday after the risk-off impulse fades away amid progress in the Russia-Ukraine peace talks. While a serious plunge in oil prices has put the Indian rupee on the front foot.

The US dollar index (DXY) has been offered strongly by the responsive sellers at around 99.30 as the market participants have started expecting an underperformance from the US Nonfarm Payrolls (NFP) indicator, which is due on Friday. A preliminary estimate of US NFP at 475k indicates disappointment in comparison with the previous print of 678K. Apart from the US Consumer Price Index (CPI) figure, US NFP is an important economic indicator, which is approached by the Federal Reserve (Fed) policymakers before dictating the interest rate policy. Therefore, a decent shrinkage in the employment numbers is likely to trim the odds of a 50 basis point (bps) interest rate hike by the Fed.

On the oil front, lockdown measures in Shanghai to contain the resurgence of Covid-19 have started highlighting heavy slippage in the overall demand.  The Chinese administration has restricted the movement of men, materials, and machines amid mass Covid-19 testing in a large part of Shanghai. India, being a major importer of crude oil is going to reap the benefits of cooling oil prices.

The major driver will remain the US NFP this week but before that investors will also focus on the speech from Fed President John C. Williams, which is due on Tuesday.