Indian Rupee bears take a breather around 82.80 as China favors cautious optimism in Asia

• USD/INR prints the first daily loss in three, retreats from multi-day high.
• China inflation, Biden Administration’s easy stand on Beijing-backed AI investment ban favor pullback.
• Cautious mood ahead of RBA Interest Rate Decision, US inflation data restrict Indian Rupee moves.
• Softer Oil price, US Dollar’s retreat from key resistance add strength to corrective bounce in Rupee.

USD/INR retreats from the highest levels since late February while snapping a two-day winning streak around 82.80 during early Wednesday. In doing so, the Indian Rupee (INR) pair justifies the cautious optimism in Asia while also cheering the US Dollar’s pullback amid a sluggish Asian session. However, the broad fears about the banking sector and the anxiety ahead of Thursday’s Reserve Bank of India’s (RBI) monetary policy meeting, as well as the US Consumer Price Index (CPI), keep the pair’s moves in check.

The latest improvement in China’s factory-gate inflation and risk-positive news from the Biden Administration, cited by Bloomberg, seem to tame the pessimism in Asia despite the downbeat China Consumer Price Index (CPI) for July.

That said, CPI declines to -0.3% YoY versus -0.4% YoY expected and 0.0% prior whereas the Producer Price Index (PPI) improves to -4.4% YoY compared to -4.1% YoY market forecasts and -5.4% previous readings.

Elsewhere, Bloomberg cited anonymous officials familiar with the matter while saying, “The US plans to target only those Chinese companies that get more than 50% of revenue from the sectors including quantum computing and artificial intelligence (AI).”

While portraying the mood in Asia, the MSCI’s index of Asia–Pacific shares outside Japan prints mild gains by tracing the S&P500 Futures at the latest. Further, the US Treasury bond yields also remain dicey and prod the US Dollar Index (DXY) as it retreats from a 2.5-month-old descending resistance line to snap a two-day uptrend around 102.45 by the press time.

Additionally, mildly offered prices of WTI crude oil, down 0.20% intraday near $82.30 as we write, also weigh on the USD/INR price due to India’s reliance on energy imports and the heavy Current Account Deficit (CAD).

Previously, the pessimism emanating from Italy’s surprise tax on windfall profits of banks joined the global rating agencies’ downward revision of the US banks and financial institutions to weigh on the risk sentiment and fueled the USD/INR price. On the same line could be fears of the UK recession and slowing economic growth in China.

Looking ahead, the softer US inflation data may favor the USD/INR sellers but the RBI’s likely status quo may defend the Indian Rupee bears moving forward.

Technical analysis

Unless providing a daily closing beneath the downward-sloping previous resistance line stretched from May 19, close to 82.60 by the press time, the USD/INR stays on the way to challenging the yearly high marked in January around the 83.00 round figure.