USD/INR: Rupee Drops as Number of Coronavirus Cases Spikes

The US dollar is up against the Indian rupee on Thursday morning after a sudden jump in the number of coronaviruses saw forex traders dump riskier emerging-market currencies in favour of the relative safety of the US dollar. Losses in the rupee were perhaps limited by oil prices rolling over from a two-day price gain.

USD/INR was higher by 4 pips (+0.05%) to 71.331 with a daily range of 71.306 to 71.502 as of 10am GMT. The currency pair rose early on before finding resistance at 71.5 and turning lower toward 71.3. Today’s modest gains detract slightly from a weekly decline of -0.27%.

USD back up after Powell’s testimony

The US dollar had been pulling back this week after dovish comments from top American central banker Jerome Powell but its quality as a haven during the coronavirus outbreak is seeing it begin to push higher again. On Wednesday Powell doubled down on the dovish rhetoric, telling the Senate Banking Committee that the Federal Reserve will use quantitative easing (QE) to fight the next recession. Powell said: “We will use those tools; I believe we will use them aggressively should the need arise to do so.” Powell noted that the Fed was not considering the use of negative interest rates.

At 13:30 GMT the US Bureau of Labour Statistics (BLS) will release US consumer price inflation statistics for January. CPI is expected to rise to 2.4% from 2.3% in December, putting it further beyond the Fed’s 2% inflation target.

INR down but recovering as oil price lowers

Oil prices slumped around 1% on Thursday after rising over 2% on Wednesday, helping the rupee which tends to rise when oil prices fall because India is a net-importer of oil.  The price of oil has rolled over from a two-day gain after the Organisation for Petroleum Exporting Counties (OPEC) reduced its forecasts for oil demand in its monthly report. The slashed forecasts come exactly a day after similar were revisions were made at the International Energy Agency (IEA) headquartered in Paris France. The downward revisions add to lowered forecasts the cartel made in January.

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