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All eyes on RBI Monetary Policy and US Economic Data

Indian rupee expected to open lower following overnight gains in dollar against major currencies after better than expected US economic data. While Asian stocks look set for a weaker open after U.S. equities sagged amid robust economic data that stoked concerns about a pullback in central bank stimulus.

The forwards indicating USDINR likely to open 10 to 12 paise higher from previous closed. USDINR June future likely to open around 73.22.

Focus of the day will remain on India’s monetary policy, the committee likely maintain interest rates at a record low for a sixth straight meeting, while retaining their dovish bias to support pandemic hurt economy

On Thursday, spot USDINR closed at 72.91 ended three days winning streaks by losing 18 paise or 0.24%. Technically, the pair is expected to consolidate in the range of 72.70 to 73.30.

USDINR 1-year forward premiums crashed to the lowest in more than four months amid speculation state-run banks have been selling forward dollars. 1-year premium down 32bps to 4.46%; fell to 4.4581%, the lowest since seen January; down over 80bps in three sessions to Thursday.

Stronger data, including ADP and ISM services, sent real yields and the dollar higher. The risk of the payroll Friday is skewed favorably to the dollar. Meanwhile, China has already been working to arrest the yuan rally, which should provide some support to the broad dollar

Overnight, S&P 500 and Nasdaq 100 fell overnight but came off lows on signs President Joe Biden may be willing to compromise on corporate taxes. Strong U.S. jobs data and record service-sector growth underscored the recovery from the pandemic. The benchmark 10-year Treasury yield increased to 1.63%, while the rally in crude oil stalled.

USDINR

USDINR June futures closed below short term moving average but manages to form bullish candle with small body.

The pair has been facing stiff resistance at 73.68, the 50 days simple moving average.

Momentum oscillators and indicators turned bullish on daily chart indicating short term upside in the pair.

USDINR June futures expected to open slightly higher and could trade in the range of 73.50 to 73 range. The bias for today remains more on bullish side following stronger dollar index and weaker Asian risk assets.

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