• Indian Rupee (INR) slips as covid cases top 273,810
  • Capital New Delhi goes into lockdown
  • US Dollar (USD) trades lower versus major peers
  • US bond yields trade lower

The US Dollar Indian Rupee (USD/INR) exchange is on the rise, paring losses from the previous session. The pair shed -0.26% across last week at 74.53. At 12:00 UTC, USD/INR trades +0.5% at 74.91. The price continues to hover at an 8 month high.

India’s Rupee has swung from being an emerging market leader to a laggard in a short space of time as the country battles a resurgence in covid. Investors fear that the surge in cases, which reached a new daily record of 273,810 on Monday will hit the country’s economic recovery.

The country’s health system is overloaded and the government is struggling with sufficient vaccine supplies. Lock down restrictions are increasing with New Delhi the latest to lockdown for 6 days starting today. The soaring vaccine cases are also hitting demand for Indian equities with the benchmark Sensex now down 5% since the all time high reached in February.

The US Dollar is rising versus the Indian Rupee. However, it is falling versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.48% at the time of writing at 91.13 its lowest level in 6 weeks.

The US Dollar is tracing US bond yields lower. The benchmark 10 year US bond yield trades at a 5 week low. Interestingly yields have been falling even as inflation data shows inflationary pressures are building. Usually yields rise when inflation expectations climb.

Recent US data has been particularly strong. US consumer price inflation and retail sales both came in ahead of forecasts last week indicating that inflation could be picking up. However, the Fed has stuck to its belief that any near term rise in inflation will be temporary.

The US economic calendar is light today so bond yields are likely to remain in focus and be a key driver of the US Dollar.