The USD/INR pair has delivered an upside break of the consolidation formed in a narrow range of 81.66-81.77 in the Asian session. The asset is demonstrating optimism amid a recovery move shown by the US Dollar Index (DXY) after dropping to near 101.70.
- The USD Index has rebounded as anxiety among investors has soared ahead of the Fed’s monetary policy.
- Consideration of a lower Fiscal Deficit and higher taxes in the Indian Union Budget could strengthen the Indian rupee.
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- USD/IDR takes offers to refresh intraday low, snaps four-day uptrend.
- Indonesia Inflation eases to 5.28% YoY, 0.34% MoM during January.
- Mixed sentiment, sluggish yields and optimism in Asia-Pacific zone favor bears.
- FOMC is the key as 0.25% is priced in but Fed Chair Powell is a hawkish policymaker.
Investors are getting anxious ahead of the interest rate decision by the Federal Reserve (Fed), therefore, the USD Index is fetching traction. The risk-averse theme is getting popular despite the being widely anticipated that the Fed will hike interest rates by 25 basis points (bps). S&P500 futures have faced immense pressure in the Asian session despite being heavily demanded on Tuesday. The alpha generated by the 10-year US Treasury bonds has dropped to 3.51%.
Apart from the Fed’s monetary policy, the release of the United States Automatic Data Processing (ADP) Employment data carries significant importance. According to the consensus, the US economy has generated fresh 170K jobs in January vs. the former release of 235K. Higher interest rates by Fed chair Jerome Powell to tame inflation have trimmed the demand for borrowings by corporate, which has led to a decline in the labor demand.
On the Indian rupee front, investors are awaiting the announcement of the Union Budget FY2023-24 by Indian Finance Minister Nirmala Sitharaman for fresh impetus. Consideration of lower Fiscal Deficit management and higher taxes by the Indian administration could strengthen the Indian rupee.
Meanwhile, the oil price is looking to extend its recovery above the immediate resistance of $79.50. Soaring expectations for higher oil demand amid a sheer economic recovery in China have strengthened the oil price. It is worth noting that India is one of the leading importers of oil and higher oil prices impact the Indian Rupee.
USD/IDR returns to the bear’s table after a four-day absence as it drops to $14,970 while refreshing intraday low during early Wednesday. In doing so, the Rupiah (IDR) ignores downbeat figures of Indonesia’s Inflation while bracing for the Federal Open Market Committee (FOMC) monetary policy meeting.
That said, Indonesia Inflation eased in January to 5.28% YoY and 0.34% MoM, versus 5.51% and 0.66% respective priors. With this, the inflation gauges also remained below the market forecasts of 5.4% yearly and 0.47% monthly figures. Even so, the key statistics remain beyond Bank Indonesia’s (BI) target and underpin the IDR strength.
Other than the upbeat Indonesia data, cautious optimism in the Asia-Pacific region also seems to favor the USD/IDR bears. It’s worth noting that an index of the Asia-Pacific shares outside Japan prints 0.60% intraday gains by the press time while Indonesia’s benchmark IDX Composite rises 0.37% on a day.
On a broader front, the S&P 500 Futures prints mild losses while the US Treasury bond yields remain sluggish and pause the previous day’s pullback. That said, the US Dollar Index (DXY) struggles to reverse Tuesday’s losses around 102.10.
Elsewhere, downbeat US data strengthened the market’s dovish bias surrounding today’s Fed meeting. However, Fed Chair Jerome Powell’s last hawkish stand and readiness to defend the aggressive rate hikes challenge the USD/IDR downside.
That said, US Employment Cost Index (ECI) for the fourth quarter (Q4) eased to 1.0% versus 1.1% market forecasts and 1.2% prior readings. Further, the Conference Board (CB) Consumer Confidence eased to 107.10 in January versus 108.3 prior. It should be noted that no major attention could be given to the US Chicago Purchasing Managers’ Index (PMI) for January which rose to 44.3 versus 41 expected and 44.9 previous readings.
Moving on, US PMIs could entertain USD/IDR traders but major attention will be given to the Fed’s verdict and Chairman Jerome Powell’s press conference.
