Rupee continues to sideways trend to negative

The majority of Asian currencies fell versus the US dollar in May due to tighter supply and haven bidding, which was a bad month for their value. Although the US government was able to suspend the debt ceiling before the anticipated June 5 X date, June got off to a somewhat better start. A fiscal crisis will be avoided thanks to the debt agreement, which also sparked a surge in financial assets.

Even after significant inflows of foreign funds that were absorbed by the central bank, the spot USDINR rose more than 1% to 82.73, halting a two-month run. The Asian currency fell in May due to a decline in the Chinese Yuan, which was accompanied by a projection for slower development and poorer economic statistics.

The Indian Rupee made a strong start to June, but the historical pattern does not support the strength, with 7 of the previous 10 years remaining bearish and depreciation of an average of 1.17%. With downside support at 83 and resistance at 81, the local currency’s technical trend is still sideways to negative.

India’s foreign exchange holdings decreased for the second week in a row, falling by $4.34 billion to $589.14 billion for the week ending May 26, the RBI reported on Friday. Revaluing dollar assets and improving liquidity conditions caused the FX pot to decline over the last two weeks, although it is still up more than $10 from $578.45bn at the end of March.

The US debt ceiling concerns, hawkish Fed member statements, positive economic statistics, and haven purchasing all contributed to the dollar’s largest monthly gains in three months. The tightening anticipated at the Fed’s July meeting was increased by a quarter point by the Fed swaps, which anticipated a pause in June. In May, the dollar finished ahead of all of its G-10 counterparts.

The June month will show the effects of policy divergence as traders and investors price in a pause from the RBI and Fed while the ECB and BoE may continue rising interest rates.

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