USD/INR Price News: Indian rupee treads water around 79.60 with eyes on US/India inflation

• USD/INR remains sidelined around one-week low, retreats of late.
• Holiday in China, pre-data anxiety restrict intraday moves amid a light calendar.
• India CPI, output details will be crucial as RBI interventions appear less effective in limiting the upside.
• US consumer-centric data could entertain traders amid Fed blackout.

USD/INR portrays the market’s inaction as it steadies around 79.60 during Monday’s Asian session. That said, cautious sentiment ahead of the key data from India and the US joins China’s holiday to restrict the Indian rupee (INR) pair’s latest moves.

It should be noted that a pullback in the oil prices seems to jostle with the market’s mixed sentiment to also challenge the USD/INR traders. That said, WTI crude oil prices snapped a two-day uptrend by retreating to $85.10 at the latest. Considering India’s heavy reliance on energy imports and higher budget deficit, the INR is prone to moves in oil prices. However, the recent fears surrounding China and Russia, coupled with the doubts over the Reserve Bank of India’s (RBI) capacity to defend the INR, with multiple interventions, seem to challenge the pair sellers.

A fall in the RBI’s headlines foreign exchange reserve to the lowest levels since October 2020, largely driven by the decline in the foreign currency assets, signaled that the Indian central bank is actively in play to defend the domestic currency versus the US dollar. However, the USD/INR remains more or less around 80.00, which in turn hints at the RBI’s inability to defend the domestic currency.

Elsewhere, fears of fresh troubles for Chinese chipmakers and headlines suggesting covid woes in the dragon nation join Russia’s retreat in some of the Ukrainian areas to weigh on the market sentiment, which in turn underpins the US dollar’s safe-haven demand.

Even so, the US Dollar Index (DXY) remains pressured around 108.80, down 0.20% intraday by the press time. In doing so, the greenback’s gauge versus the six major currencies also ignores downbeat comments from US Treasury Secretary Janet Yellen and some of the key Fed policymakers.

“Fed is going to need skill and luck to bring inflation down while maintaining labor market strength,” said US Treasury Secretary Yellen during the CNN interview. On the other hand, Federal Reserve Governor Christopher Waller was the prominent one as he said on Friday that he supports another significant hike in two weeks. On the same line was Kansas City Fed President Esther George who said, as reported by Reuters, “Case for continuing to remove policy accommodation is clear cut.” Furthermore, Cleveland Federal Reserve Bank President Loretta Mester said, “One inflation report is insufficient to alter one's outlook.” The policymaker also stated that he sees policy rates rising slightly above 4% by early 2023.

Moving on, India’s Consumer Price Index (CPI) for August, expected 6.9% versus 6.71% prior, appears important for the USD/INR traders as strong numbers could push the RBI towards more rate hikes, which in turn may offer intermediate relief to the INR bulls. However, the lack of market action and the scheduled release of the US CPI and Retail Sales for August, as well as the preliminary readings of the Michigan Consumer Sentiment Index for September, will be important to watch for clear directions.

Technical analysis

USD/INR sellers seem to tighten their grip inside a monthly trading range between 79.30 and 80.20.