USD/INR is bullish in early trading on Thursday, recovering losses from yesterday. At the time of writing, one US dollar buys 75.786 Indian rupees, up 0.31% as of 5:55 AM UTC. On larger timeframes, the pair still doesn’t hint to any clear direction.
The greenback slipped yesterday evening after the Federal Reserve released the minutes from the April meeting, which show that the central bank is worried about extraordinary risk caused by the pandemic. The document reveals that policymakers are still debating on the best way to support the US economy.
Despite everything, most US central bankers didn’t support the idea of negative interest rates, which is endorsed by US President Donald Trump. Recently, the Fed slashed its interest rates to almost zero. It also launched unlimited quantitative easing, purchasing trillions of dollars of bonds.
The minutes read:
“While participants agreed that the current stance of monetary policy remained appropriate, they noted that the Committee could, at upcoming meetings, further clarify its intentions with respect to its future monetary policy decisions.”
Fed Officials Afraid of More Waves of Outbreak
Most participants agreed that more action is further needed, though they didn’t specify when. Central bankers called for more clarity on bond purchases.
Also, Fed officials are worried about the potential more long-lasting effects of the coronavirus than initially thought. Policymakers said there was “a substantial likelihood of additional waves of outbreak in the near or medium term.”
So far, over 36 million US citizens had filed for unemployment benefits since March when states introduced the lockdown measures. Most economists expect the unemployment rate to exceed the 25% record set about 90 years ago during the Great Depression.
However, following a short-term reaction to the Fed’s gloomy report, the US dollar has recovered the losses as the number of coronavirus cases is surging in countries like Brazil and Mexico, making a case for a safe haven asset like the greenback.
As for the Rupee, it’s still under increased pressure as India might face the worst recession in its history. Rating agency ICRA downgraded its growth outlook to a 5% contraction in the current fiscal year from up to 2% growth expected earlier.