The US dollar is down against the Indian rupee on Wednesday morning as markets take a more favourable view on the likely economic impact of the coronavirus on Asian counties including India, while the dollar sees light selling before the release of Fed minutes later
USD/INR was higher by 20 pips (+0.28%) to 71.52 with a daily range of 71.34 to 71.56 as of 10am GMT. After falling on Monday by -0.28%, the currency pair held onto 71 support and as of today is back to flat on the week.
USD/INR: INR benefiting from the government measures
The rupee is benefiting slightly from the prospect of the Delhi government enacting new measures to cushion the Indian economy from the coronavirus outbreak in China. Finance Minister Nirmala Sitharaman told journalists at a press conference that the availability of raw materials means there is no crisis because of the virus but that the government will announce measures to protect domestic industry nonetheless in the coming days.
Elsewhere emerging market currencies, including the Chinese yuan were up modestly in the line with improved market sentiment which has seen Asian stocks markets including the Sensex and Nifty lift off sessions lows to turn higher. A lift off yearly lows in the price of oil is capping any gains in the rupee, which tends to benefit when Indians have a lower cost of fuel.
The dollar
Reduced haven slows are discouraging dollar buyers on Wednesday as traders await the release of FOMC minutes from the January Fed meeting in which interest rates were kept at a range of 1.50-1.75%.
Investors already have a more up-to-date assessment of the US economy from the testimony of Federal Reserve Chair Powell last week so comments on the economy from the minutes will be rather stale. Perhaps some extra clarity on the risks the coronavirus poses to the US economy could create some dollar-volatility, but it is likely that policymakers stick to the refrain that “it’s still too early to tell”. As such a greater focus would be placed on the current policy review and any changes made to the 2% inflation target.