Indian rupee dribbles near all-time high of 78.46 despite RBI intervention

  • USD/INR resumes offers towards the all-time high marked earlier in the day.
  • RBI intervention fails to support INR rebound amid firmer oil prices and hawkish Fed hopes.
  • Indian equities managed to encourage cautious optimism on pessimistic US inflation expectations and weaker US data.

USD/INR is adding strength to overcome the 78.50 hurdle after witnessing the second pullback from 78.46 in Monday’s Asian session, resuming offers at 78.31 as we go. will put to press. In doing so, the Indian Rupee (INR) pair justifies the strength of the US Dollar while raising doubts about the intervention of the Reserve Bank of India (RBI).

The US Dollar Index (DXY) posted the first of four weekly losses late in Friday’s session, before the latest rebound to 104.06. Recent gains in the greenback’s gauge could be linked to the revival of inflation expectations in the United States and fears of a faster rate hike, not to mention the geopolitical headlines surrounding Russia and China.

On the other hand, the intervention of the RBI fails to support the rebound of the INR as traders are still unconvinced of the Indian central bank’s ability to tame the inflation problems at home, without forget the record budget deficit, amid firmer oil prices and a risky mood.

On Friday, the Business Standard raised concerns over the RBI’s decision to take delivery of dollar futures long positions ahead of time to hint at passive efforts to defend the US dollar.

It is worth mentioning that Friday’s US data and the latest rebound in US inflation expectations raised concerns about the previous risky mood and also propelled USD/INR prices. That said, US new home sales for May, up 10.7% from April’s revised figures of -12.0%, joined the printing record of the final index reading. the University of Michigan consumer confidence for June, at 50.0 versus 50.2 initial estimate, also drowned out the US dollar.

U.S. inflation expectations, based on the 10-year breakeven inflation rate from the St. Louis Federal Reserve (FRED) data, have recovered from a four-month low at the end of Friday’s North American session. The latest print from the inflation gauge is 2.56%, following the previous three-day downtrend that hit the lowest levels since February at around 2.50%.

Elsewhere, market sentiment is waning as Group of Seven (G7) leaders prepare to take action against Russian oil and gold, due to the invasion of Ukraine. Moreover, comments from the White House also challenge risk appetite and propel USD/INR prices. saying: “The United States is confident that the new NATO strategy document will include ‘strong’ language on China, a White House official said on Sunday, adding that negotiations over how to refer to Beijing were still ongoing,” according to Reuters information.

Looking ahead, US Durable Goods Orders for May, expected at 0.1% vs. 0.5% previously, along with Pending Home Sales, expected at -2.0% vs. -3, 9% before, will be important for daily directions. However, Wednesday’s debate between US, UK and European central bankers at the ECB’s Central Banking Forum will be an important event to watch for clear market guidance.

Technical analysis

A five-week-old bearish rising wedge chart pattern limits short-term USD/INR moves between 78.10 and 78.60. It should be noted that the 10-DMA reinforces the support at 78.10, a break of which could lead the pair to the March high near 77.17.