USD/INR likely to trade even higher towards 68.00 level, to start consolidating if 10-year UST yield stabilizes: Scotiabank

The USD/INR currency pair is expected to trade even higher towards the 68 level, although the pair has been technically overbought according to the RSI index. Further, the pair is also seen to start consolidating if the 10-year U.S Treasury yield stabilizes, according to a recent research report from Scotiabank.

The INR has tumbled recently amid continued portfolio outflows. Foreign investors have pulled out USD740 million and USD1.401 billion of funds respectively from local equity and bond markets month-to-date, according to the NSDL data. In general, the NIFTY50 share index has been advancing gradually with resilience in April.

However, rising UST yields, bouncing oil prices and the RBI’s hawkish tone on concern over India’s elevated core CPI inflation have weighed on INR-denominated bonds and undermined the INR afterward. In addition, FPIs on Tuesday bid for investment limits in G-securities worth of INR207 billion only as against INR260 billion on offer, suggesting overseas funds’ waned interest in local debt.

"Higher oil prices have raised market concern over India’s current account deficit as well, adding to the depreciation pressure on the INR. French President Emmanuel Macron said on Thursday morning HKT that he thinks US President Donald Trump will pull out of the Iran nuclear deal due for review in May, which could boost oil prices further in our view. In addition, we note the nation’s NPAs have cast a shadow on its credit supply growth down the road," the report added.

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