Rupee renews yearly low past 83.00 on China concerns, India inflation, Fed Minutes eyed

• USD/INR takes the bids to prod late 2022 peak, defends three-week uptrend.
• Fears of India’s struggle to take China’s position as global manufacturing hub, cautious mood ahead of CPI weigh on Rupee.
• RBI inaction jostles with looming Fed policy pivot but China-inflicted risk aversion propels USD/INR.
• Key resistance break allows Indian Rupee to challenge record low marked in 2022 ahead of FOMC Minutes, US data.

USD/INR bulls cheer risk aversion in Asia, as well as the anxiety ahead of India inflation data, to refresh yearly high near 83.10 during early Monday. In doing so, the Indian Rupee (INR) pair also justifies the domestic struggle to take over China amid the Reserve Bank of India’s (RBI) inaction.

Financial Times (FT) highlights the iPhone maker Foxconn’s cautious optimism about India to cite the hurdles for the Asian economy as it benefits from the global “China plus one” move. Also challenging the INR could be the third weekly fall in the foreign exchange reserves. Furthermore, the RBI’s status quo despite the inflation woes at home, expected to escalate further, also propel the USD/INR prices.

On the other hand, weekend news from China suggests further hardships for the world’s second-largest economy, as well as for the global economic mechanism. Also challenging the sentiment are geopolitical concerns about Russia and the recently firmer US data, which in turn fuel the US Dollar and the USD/INR prices.

China’s Country Garden pauses its bond trading and a few companies from the Dragon Nation complain about not receiving payments from a subsidiary of Chinese conglomerate Zhongzhi Enterprise Group, the debt woes regain momentum.

On the same line, the talks of a liquidity crunch at the Zhongzhi Enterprise Group were out and loud previously and the latest actions confirm the market players’ fears. Elsewhere, the US-China trade war and Russia’s firing of warning shots at a warship in the Black Sea also roil the market’s risk profile.

It’s worth observing that the upbeat US data and strong Oil price also underpin the USD/INR pair’s run-up due to India’s reliance on energy imports. That said, the US Dollar Index (DXY) renews its monthly top near 103.00 while WTI crude oil refreshed its yearly top the last week, easing to $82.45 by the press time.

While portraying the mood, the S&P500 Futures drop 0.20% intraday as it fades the previous day’s corrective bounce off the monthly low whereas the US 10-year Treasury bond yields remain firmer around 4.18% by the press time. Furthermore, the MSCI’s index of Asia-Pacific shares outside Japan drops 1.62% on a day at the latest.

Moving on, India’s Wholesale Price Index (WPI) and Consumer Price Index (CPI) for July will direct intraday moves of the USD/INR pair but major attention will be given to the risk catalysts for clear directions.

Technical analysis

A daily closing beyond the tops marked in late 2022 around 83.20 becomes necessary for the USD/INR bulls to challenge the record high marked the last year at around 83.45. On the contrary, the overbought RSI conditions may play a role in dragging the quote. However, the Indian Rupee (INR) pair sellers remain off the table unless witnessing a daily close below July’s peak of around 82.80.