• Indian Rupee (INR) is under pressure whilst the safe haven US Dollar (USD) rises
  • Mood in the market sours amid rising covid cases
  • Oil tanks 1% supporting the Rupee
  • US durable goods orders up next

The US Dollar Indian Rupee (USD/INR) exchange rate is heading lower on Friday, snapping a two day winning streak. The pair settled on Thursday +0.45% at 73.90. At 13:30 UTC, USD/INR trades just a few pips higher at 73.72. The pair is on track to rise +0.25% across the week, its fourth straight week of gains.

Economists believe that the State Bank of India will leave interest rates on hold for the remainder of the year as it attempts to balance high inflation with boosting the economy out of its worst ever recession.

Inflation in August held at 6.69%, at the upper end of the RBI’s medium-term target range of 2% – 6% for a fifth consecutive month. Supply disruptions continue in India affecting inflation, as coronavirus spreads faster in the country than anywhere else in the world. The Indian economy contracted by 23.9% last quarter.

Meanwhile falling oil prices are offering support to the Rupee. West Texas Intermediate is trading over 1% lower and under $40 per barrel as concerns over the demand outlook rise. With the number of coronavirus cases rising substantially in Europe and mid America, tightened lockdown restrictions could see oil slip lower still.

The US Dollar is trading higher versus its peers owing to safe haven flows. The risk off mood in the market on covid fears is seeing investors sell out of riskier currencies and assets and increasing flows into safe haves such as the US Dollar.

Concerns over the lack of additional fiscal stimulus n the US are also weighing on sentiment. With the Presidential elections so close, fears are growing that the Democrats and Republicans won’t agree a fiscal deal. The latest reports suggest that talks could be progressing towards a $2.2 trillion dollar deal. But this still hasn’t been agreed.

US durable goods sales are in focus.