USDINR Price News: Indian Rupee retreats from seven-week low to 80.70 as post-US Inflation optimism fades

• USDINR licks its wounds at the lowest levels since late September.
• Eight-month low US CPI bolstered hopes of Fed’s easy rate hikes going forward.
• China-linked risk-aversion joins sluggish market moves to trigger USDINR consolidation.
• US Michigan CSI, risk catalysts eyed for fresh impulse.

USDINR prints mild gains around 80.70 as it pares the recent losses around a seven-week low during Friday’s Asian session. In doing so, the Indian Rupee (INR) pair takes clues from the market’s cautious mood, after a euphoric optimism, amid a sluggish start and a light calendar.

Other than the absence of major data/events, the coronavirus woes from China also propel the USDINR prices. That said, China’s Beijing reports the biggest daily jump in the covid cases in over a year. For the nation as a whole, the daily coronavirus numbers grew past 10,000 for the first time in seven months.

Elsewhere, firmer equities in the Asia-Pacific region and inactive yields, thanks to the strong Wall Street closing and bank holidays in the US and Canada, also underpin the USDINR rebound. Furthermore, the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021.

It should be noted that a sharp decline in the US Consumer Price Index (CPI) for October surprised markets by declining to 7.7% YoY, the lowest since last March, versus 8.0% expected and 8.2% prior. More importantly, the Core CPI dropped to 6.3% compared to 6.5% market forecasts and 6.6% previous readings.

While reacting to the US inflation, Dallas Federal Reserve President Lorie Logan said that October CPI inflation data is a welcome relief while adding that (it) may soon be appropriate to slow pace of rate increases. On the same line, Federal Reserve Bank of Philadelphia President Patrick Harker said on Thursday that the US Federal Reserve could slow the rate hike pace in the coming months, as reported by Reuters. It should be noted that Kansas City Federal Reserve President Esther George, Federal Reserve Bank of Cleveland President Loretta Mester and San Francisco Fed President Mary Daly also recently promoted easy rate hikes for future meetings.

As a result, the CME’s FedWatch Tool signals a nearly 80% probability of the Fed’s 50 basis points (bps) rate hike in December versus around 55% just following the last week’s Fed meeting.

It’s worth noting that the recently firmer oil prices, up 0.61% near $86.70 by the press time, also weigh on the Indian Rupee due to the nation’s heavy reliance on energy imports and a troublesome level of the Current Account Deficit (CAD).

Looking forward, the first readings of the US Michigan Consumer Sentiment Index (CSI) for November, expected 59.5 versus 59.9 prior, could join the updates from China and Fedspeak to entertain USDINR traders. Even so, the bears are likely to remain less affected considering the latest shift in the market’s outlook for the Fed’s next move due to the US inflation data.

Technical analysis

100-DMA joins the nearly oversold RSI conditions to challenge USDINR bears around 80.50. The recovery moves, however, remain elusive unless crossing the 50-DMA hurdle surrounding 81.45.