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- USD/INR will likely start Friday’s session cautiously after a holiday on Thursday.
- The correction in the oil price could offer support to the Indian Rupee.
- FIIs continue to offload their stake in the Indian stock market despite rising hopes of a US-India bilateral deal.
The USD/INR pair ended Wednesday’s session with modest gains around 90.55. On Thursday, Indian stocks, commodity, and currency markets are closed due to the Mumbai Municipal elections.
The pair is expected to start Friday’s session on a cautious note as the Indian Rupee (INR) is expected to attract slight bids due to a sharp correction in the Oil price. WTI oil price retraces sharply to near $59.70 after revisiting the three-month high of $62.20 as United States (US) President Donald Trump calms fears of military action in Iran, following assurance that they will stop killings of protesters.
Earlier this week, US President Trump threatened to attack the government of Supreme Leader Ayatollah Ali Khamenei for executing protesters amid civil unrest in various cities of Iran. Easing fears of US military action has calmed fears of supply chain disruptions.
Currencies from economies that rely heavily on imports of Oil to cater to their energy needs come under pressure in a high oil price environment.
Broadly, the outlook of the Indian Rupee is expected to remain fragile amid the absence of a trade deal announcement between the US and India. This week, negotiators from the US and India claimed that trade talks on Tuesday remained positive, and they will conduct the next meeting very likely in February, a scenario that is favorable for the Indian Rupee, but failing to improve the sentiment of overseas investors toward the Indian stock market.
The reaction from Foreign Institutional Investors (FIIs) remained negative toward the Indian equity market despite signs of improving US-India trade deal hopes. On Wednesday, FIIs offloaded their stake worth Rs. 4,781.24 crore, according to data from NSE. So far in January, FIIs have remained net sellers in nine out of 10 trading days, and have pared their stake worth Rs. 21,706.27 crore.
Meanwhile, the US Dollar (USD) trades firmly on expectations that the Federal Reserve (Fed) will pause its monetary-easing campaign in the policy meeting later this month. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to its monthly high at 99.26.
