INR: USD/INR Extends Recovery Following Failed Breach of 85.00

Initial greenback strength at the start of the APAC session – fuelled by comments from Trump who stated that he has no intention of firing Fed Chair Powell – prompted a solid move higher for USD/INR overnight, though gains for the pair moderated to 0.27% (from as high as 0.39%) at the close as the USD struggled to hold momentum. 

• According to traders who spoke to Reuters, USD/INR’s failure to break the 85.00 handle (as well as the 200-DMA near 84.95) has shaken confidence of rupee bulls, prompting an unwind of long positions. Meanwhile, a Fox reporter tweeted that “momentum seems to be shifting to India from Japan on the first possible trade deal,” though there was no reaction in INR to this.
• Markets will await the release of the minutes of the RBI’s April policy meeting later today for cues on future rate cuts. At the April meeting, the central bank cut its key repo rate by 25bps to 6.00% while shifting its stance to ‘accommodative’ from ‘neutral’, suggesting additional easing is on the horizon. The next policy meeting is scheduled for June 06. Local data releases are scant for the remainder of the week after flash PMI figures for April this morning pointed to another strong month across sectors. Notably, the manufacturing index rose to its highest level in a year (58.4 vs. 58.1 prior).