USDINR and Global markets – morning update

17th May 2021

USDINR likely to open around 73.30

The Dollar slightly weakened on Friday and risk appetite was strong in US markets after the retail sales in the US stalled at 0% for April. The effect of the stimulus checks faded in April, and markets read it as a temporary pause which would alleviate some of the inflation concerns. US equities jumped 1%+ on Friday. EUR is higher at 1.2140 and JPY is at 109.40. US yields came off, with 10y back to 1.63% level, on improving risk appetite. Indian equities ended flat on Friday.

The covid numbers are improving slowly and India seems to be past the peak on May 8th. With Covid numbers improving, US inflation fears on hold at least for the immediate term, and with Dollar strength pausing, INR is in a safe zone for now. Large appreciation of the Rupee from here is still unlikely unless there is a significant shift towards a trend of Dollar weakness. Further, the RBI could play a role in holding a sharp INR appreciation. While US inflation fears have subsided due to both jobs data and lower retail sales, the actual inflation numbers came in higher last week and those fears would re-surface sooner or later. USDINR could remain in a range until there is a large shift in this perception.

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