USD/INR stays below 71.00 amid calls of RBI, Indian government measures
- USD/INR repeats the pattern of gain and loss while trading below 100-day SMA.
- RBI is up for another OMO, likely to shift its policy stance.
- The Indian government is rolling sleeves to confront depleting revenues, fears of a slowdown.
USD/INR is on the back foot while trading around 70.97 during the pre-European session on Friday. The pair fails to portray the overall US dollar strength, like other currency pairs, maybe due to the cautious optimism as well as China data.
The Reserve Bank of India (RBI) is up for another Open Market Operation (OMO), the fourth one recently, wherein it will simultaneously buy and sell the government bonds on January 23. The same is mostly termed as “Operation Twist”, as said by Bloomberg. On a different note, analysts at ING said, “We consider 7% GDP growth a pre-requisite for the RBI to unwind some of its recent policy easings. That’s not on our forecasting horizon out to 2021. A shift in the policy stance to neutral from accommodative is a reasonable starting point for the central bank's next policy meeting in early February.”
Further, the Indian government is also active to announce various plans to boost its revenues while also pleasing the voters in its upcoming budget via multiple tax reliefs and changes to payment recovery structures, opening up for foreign investments, etc.
The market’s risk tone might also have been positive as China registered upbeat releases of December month Industrial Production and Retail Sales. However, gains were capped by no change in the headline GDP figures for the fourth quarter (Q4).
The USD registered broad gains the previous day after the US data marked upbeat results. Also supporting the greenback were expectations of the Trump administration to be in the ruling position after signing the recent trade deals with global giants.
Traders will now focus on the US data as well as trade headlines amid a lack of Indian catalysts.
Technical Analysis
Prices are capped within the 75-pip area comprising 100 and 200-day SMAs between 71.25 and 70.5 respectively.