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Dollar Gains as Market interprets Fed Minutes as Hawkish - HDFC Securities

* Rupee expected to open left following surge in dollar against major currencies and risk-averse sentiments after Federal Reserve meeting minutes. The dollar is ending the week on a strong note with the weakest links being hit again. Part of the dollar momentum is coming from USDCNH which has jumped above 6.50 as weakness in Chinese equities continues to hurt sentiment. The weakness in yuan could also weigh on other Asian currencies and rupee may also feel the heat.

* On Wednesday, spot USDINR fell 10 paise to 74.25. The pair to resume, after Moharram holiday, with higher opening and could bid well on back of haven demand while lower crude oil may give some support the bias for today remains bullish.

* Indian rupee has seen resilient move against rising dollar in last couple of month following strong inflows through primary market activities. The amount of money raised in initial public offerings this year has reached $8.8 billion. At the current pace, 2021 would exceed the all-time record of $11.8 billion.

* Asian stocks look set for a cautious open Friday as the delta virus strain and the prospect of reduced central bank stimulus continue to weigh on the economic outlook, hurting commodities and bolstering the dollar. The dollar hit a 10-month high on concern the delta variant could threaten the global economic recovery. Haven currencies including the Japanese yen also gained against their Group-of-10 peer

* America is again one of the worst hotspots for coronavirus infection on Earth. Covid-19 patients are dying in U.S. hospitals at levels not seen since February—and the numbers are expected to keep climbing

* Oil extended its drop to the lowest level since May after the U.S. Federal Reserve on Wednesday signaled it was set to start tapering asset purchases within months, hurting commodities and lifting the dollar.

* Governments around the world have rolled out about $16 trillion worth of fiscal measures to prevent economic collapse during the pandemic, according to IMF figures.

* President Joe Biden said the Taliban are in the midst of an “existential crisis” about their role on the international stage but that he didn’t believe the group had fundamentally changed course.

USDINR

Technical Observations:

* USDINR August futures formed inside bar indicating indecisiveness. The pair has support at 74.20 and resistance at 74.65.

* The pair has been still in bearish formation of lower highs and lows on daily chart.

* It has been staying well below short term moving averages but holding the support of 50% Fibonacci retracement at 74.27 adjoining recent up swing of 73.20 and 75.35.

* Momentum oscillators exited from oversold zone and expected to head north indicating short covering rally

* We expect USDINR August futures could open slightly higher and consolidate in range before heading towards 74.65 while any level below 74.20 negate the upward movement.

USDINR August Hourly Chart

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