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USD/INR seesaws around five-week low, all eyes on Fed decision

  • USD/INR registers three-day losing streak.
  • The USD bounces off ahead of the FOMC, trade war fears prevail.
  • Fed is widely anticipated to stand pat, rate outlook for 2020, Powell’s speech in focus.

With the USD/INR pair sellers catching a breath around five weeks’ low, the quote seesaws near 70.84 amid initial Indian market trading on Wednesday.

The pair has recently been on the fall as the Reserve Bank of India’s (RBI) surprise hold pushed back calls of further rate cuts from the Asian central bank. Market reports of increased corporate inflows should have contributed to the pair’s declines. Even so, doubts surrounding the Indian economic growth, fiscal slippages and inflation numbers prevail.

Recently, the Asian Development Bank (ADB) cuts its growth view for China and other developing economies of Asia while citing trade war fears as the key catalyst. The United States (US) and China have been at loggerheads over the phase-one deal since long but the nearness to December 15 US tariff deadlines arouses market fears of the full-fledged trade war.

As per the latest communication from the White House adviser Peter Navarro, it is up to the Chinese as to whether to get a deal.

Risk tone stays heavy ahead of the key events that start with the US Federal Reserve’s (Fed) monetary policy meeting. The US 10-year treasury yields seesaw near 1.83% while India’s BSE SENSEX marks near 0.40% gains to 40,400.

Moving on, global investors will now await the Fed’s monetary policy decision ahead of the United Kingdom’s (UK) December 12 election and the US tariff deadline on China. While the Federal Open Market Committee (FOMC) is likely to snap its three consecutive rate cuts, rate signals for 2020 and Chairman Jerome Powell’s press conference will be the key to watch.

Technical Analysis

An upward sloping trend line since late-September, around 70.63/65 could trigger the pair’s near-term recovery. Though, buyers will remain skeptical unless the quote rises past-November 27 low near 71.23.

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