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Steady start following overseas trend  

Indian rupee joined the party with other Asian currencies with gaining 15 paise to 73.93 a dollar on back of rebound in risk-sentiments, weakness in dollar index, better than expected manufacturing activities in April and slower virus case counts. The number of confirmed Covid-19 cases in India slowed for a second day to a total of 19.93 million. New infections of 368,147 reported on Monday were the lowest in five days.

The manufacturing sector stayed robust across much of Asia in April, with the PMIs of several economies hitting multi-year highs. The strength came despite a flareup of the virus in some parts of the region. India’s Markit manufacturing PMI for April came at 55.5 from previous 55.4 .

USDINR near-term forward premiums surged on Monday amid a glut of dollars in the banking system, with traders citing inflows related to PowerGrid InvIT IPO for which foreign funds may have sold dollars in spot and taken a contrary position in forwards. USDINR 1-month annualized forward premia up 240 bps to 8.4350% and 3-month up 110bps to 6.4295%

Technically, spot USDINR is having support at 73.70, the 200 DMA and resistance at 74.30.

The 10-year bond yields fell 3bps to 6%, yields dropped after the reported deals segment showed 31b rupees of 10-year changed hands, leading traders to suspect RBI intervention.

The dollar lagged all its Group-of-10 currency peers as Treasury 10-year yields slipped following a report showing U.S. factory growth eased in April. The pound led gains, while the euro rose by the most in over a week. However, Inflation risks continue to haunt U.S. dollar rate curves, even though Jerome Powell and Janet Yellen have both played down the risks as being transient.

USDINR

USDINR May futures.

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