USD/INR has extended its gains in early trading on Monday, though it doesn’t necessarily mean that the pair is poised for another bullish week. First, the price will have to break above 76.000, which is a strong resistance level that worked on May 11. Currently, one US dollar buys 75.928 Indian rupees, up 0.15% as of 5:25 AM UTC.
The greenback handles the pressure from rising tensions between the US and China. In the weekend, Trump advisor Peter Navarro said in an interview that China hid the virus for two months and then sent hundreds of thousands of Chinese on aircraft to New York, Milan and other cities to spread the virus. Meanwhile, the US blocked chip supplies to Huawei.
US Consumer Sentiment Unexpectedly Up
The American currency is supported by improving consumer household sentiment. On Friday, the University of Michigan’s preliminary index of consumer sentiment surprisingly edged up in May, driven by relief payments and discounts. Nevertheless, concerns over the longer-term economic performance have worsened. The flash sentiment index left the eight-year low and increased by 1.9 points to 73.7. Analysts expected a further decline to 68.
The gauge of current conditions surged 8.7 points while the expectations index dropped 2.4 points.
Richard Curtin of the University of Michigan explained:
“Confidence inched upward in early May as the CARES relief checks improved consumers’ finances and widespread price discounting boosted their buying attitudes. Despite these gains, personal financial prospects for the year ahead continued to weaken.”
Meanwhile, some US businesses are gradually opening their operations. The auto industry hopes to recover step-by-step, with auto assembly plants scheduled to open today. General Motors, Ford, and Fiat Chrysler Automobiles all are reopening their American factories. The industry accounts for 6% of the US economy.
On Sunday night, Fed chairman Jerome Powell admitted on CBS News’ “60 Minutes” that the US was going through an unprecedented recession. However, he stressed:
“But I would just say this. In the long run, and even in the medium run, you wouldn’t want to bet against the American economy.”
As for India, the rupee has slightly declined after Goldman Sachs said India would experience the worst recession in its history.