• Indian Rupee (INR) pares strong gains from Tuesday
  • Indian manufacturing growth slows
  • US Dollar (USD) rises on risk flows as Biden hints at firm stance versus China
  • US ADP payroll data in focus

The US Dollar Indian Rupee (USD/INR) exchange rate is rebounding higher on Wednesday, paring losses from the previous session. The pair settled -0.7% lower on Tuesday at 73.48.  At 11:15 UTC, USD/INR trades +0.4% at 73.77.

Growth in Indian manufacturing lost momentum in November, as new orders slowed and covid restrictions caused the employment sub-component to drop.

The IHS manufacturing pmi fell to 56.3 in November, a three-month low, down from 58.9 in October. The level 50 separates expansion from contraction.

Risk sentiment has soured on Wednesday which is dragging on riskier assets and currencies such as the Indian Rupee, whilst boosting demand for the safe haven US Dollar. US futures are trading lower reflecting the risk off mood. The Indian benchmark Sensex also closed in the red.

The mood in the market has deteriorated following comments from US President elect Joe Biden overnight. The incoming US President warned that that he would not immediately undo the Phase 1 trade agreement with China. His comments shed some light on his approach to Beijing and it seems that that Biden could take a tougher stance towards China with relations taking longer to normalise than initially expected.

US fiscal stimulus is also back in focus after a bipartisan group of lawmakers put forward a proposal for a $900 billion covid rescue package. The proposal appears to have failed at the first hurdle, but developments will be keenly eyed.

Looking ahead investors will turn their attention to US ADP private payroll data which is due to be released in the US session. Analysts are expecting 475,000 private jobs to have been added in November compared to 365,000 added in October. A strong print would bode well for Friday’s keenly awaited non-farm payroll report.