USD/INR PRICE NEWS: RUPEE LICKS ITS WOUNDS NEAR 82.40 AHEAD OF INDIA, US INFLATION CUES

USD/INR sticks to mild losses near 82.35 as it consolidates the biggest daily gain in nearly two months during early Tuesday. In doing so, the Indian Rupee pair takes clues from the receding fears of hawkish Fed rate moves amid a sluggish session ahead of the US Consumer Price Index (CPI) data for February.

Interest rate futures hint at the US Federal Reserve’s (Fed) policy pivot, especially after the recent fallout of the Silicon Valley Bank (SVB) and the Signature Bank. “The US Fed Fund Futures have priced in a 69% chance of a 25-bps hike at next week's Fed policy meeting, with a more than 30% probability of a pause,” said Reuters while also adding that the market last week was poised for a 50-bps increase prior to the SVB collapse. On the same line could be the CME as it mentioned, “Traders see 33% chance Fed holds rates this month, market pricing shows rate cuts expected as early as June.”

On the other hand, the US Treasury bond yields’ corrective bounce should have underpinned the USD/INR pair’s run-up but couldn’t as the Indian Rupee (INR) pares the previous day’s gains, mainly levied due to the downbeat India Inflation data and the equity market rout.

That said, India Consumer Price Index (CPI) for February, rose 6.44% YoY versus 6.35% expected and 6.52% prior. The receding inflation fears raised concerns that the Reserve Bank of India (RBI) may refrain from further rate hikes now that the Fed bets suggest a policy pivot. Even so, the Indian equities failed to cheer receding hopes of hawkish monetary policy actions amid the equity rout during early Monday. It should be noted that India’s benchmark BSE Sensex dropped to the five-month low the previous day before printing mild gains of around             58,300 by the press time.

On a macro level, traders witnessed heavy bond buying the previous day as the US banking regulators rushed to defend the SVB and the Signature Bank after their fallouts. US banking regulators undertook joint actions to tame the risks emanating from SVB and Signature Bank during the weekend.  While announcing the plan, US President Joe Biden noted on Monday that investors in those banks will not be protected and reminded that "no one is above the law." However, the US President also vowed to take whatever action was needed to ensure the safety of the US banking system, per Reuters.

Amid these plays, Wall Street closed mixed and the S&P 500 Futures print mild gains at the latest.

Moving forward, India’s WPI inflation for February will precede the US CPI for the said month to direct immediate USD/INR moves. Given the latest blow to the hawkish Fed bets, any more softening of the US inflation numbers could allow the pair to recall the sellers.