USDINR Price News: Indian rupee drops back to 81.20 amid sour sentiment

• USDINR bounces off 100-DMA to print the biggest daily gain in seven weeks.
• Biden-Xi headlines, Fed’s Waller triggered risk-off mood amid a light calendar.
• Moody’s cuts India’s 2022 GDP growth forecasts by citing higher interest rates, inflation and global economic slowdown.

USDINR braces for the biggest daily jump in nearly two months as it picks up bids to 81.20 during early Monday morning in Europe. In doing so, the Indian Rupee (INR) pair cheers the US Dollar’s rebound amid the risk-off mood.

The downbeat sentiment takes clues from anxiety ahead of the Group of 20 Nations (G20) meeting in Bali. Also weighing on the risk profile are the comments from US Federal Reserve (Fed) Governor Christopher Waller, as well as gloomy statements from the International Monetary Fund (IMF). It should be noted that Moody’s downgrading of Indian growth forecasts for 2022 exerts additional downside pressure on the INR.

“Rating agency Moody's cut India's growth projections for the current and next calendar year due to higher inflation, high-interest rates and slowing global growth that, it believes, will dampen economic momentum more than it had expected,” said Reuters. The global rating giant now expects India’s Gross Domestic Product (GDP) to grow 7.0% in 2022 versus 7.7% in previous forecasts. Moody’s also expected GDP growth to deteriorate to 4.8% in 2023 before recovering to 6.4% in 2024. It should also be noted that the Reserve Bank of India (RBI) expects India to grow by 7.0% in 2022.

On the other hand, Fed’s Waller said, “Rates will not fall until there is ‘clear, strong evidence’ inflation is falling,” which in turn curtailed the dovish bets on the Fed’s next moves. The policymaker, however, also mentioned that the Fed can begin to consider moving at a slower pace.

Elsewhere, the IMF blamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine, per Reuters.

While portraying the mood, S&P 500 Futures drop half a percent whereas stocks in the Asia-Pacific region traded mixed. Further, the US 10-year Treasury yields snap a three-day downtrend of around 3.90% at the latest.

Moving on, the USDINR traders should pay attention to the G20 meeting, especially to the meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, for clear directions. Ahead of the event, up for taking place around 09:30 AM GMT, Reuters quotes US President Biden as saying that the US communication lines with China would stay open to prevent conflict, with tough talks almost certain in the days ahead. The news also mentioned, “The United States would ‘compete vigorously’ with Beijing while "ensuring competition does not veer into conflict", said Biden, stressing the importance of peace in the Taiwan Strait during an address to the East Asia Summit in Cambodia. He arrived in Bali on Sunday night.” On the same line, US Treasury Secretary Janet Yellen also mentioned, per Reuters, “Biden-Xi meeting aimed at stabilizing u.s. relationship with china, but have been clear about national security concerns.”

Technical analysis

Although the 100-DMA restricts immediate USDINR downside near 80.45, the recovery moves need validation from a seven-day-old descending resistance line, around 81.52 by the press time.