• USD/INR is expected to cross an all-time high at 79.40 amid a firmer DXY.
• The Indian rupee may display recovery signs as FIIs are returning to Dalal Street.
• Oil prices are regaining their glory as investors have underpinned supply worries.

The USD/INR pair is aiming toward its all-time high at 79.40 amid a broader strength in the US dollar index (DXY). The asset is performing stronger as higher estimates for the US Consumer Price Index (CPI) are bolstering the case for a 75 basis point (bps) interest rate hike by the Federal Reserve (Fed).

Inflation is already skyrocketing in the US economy and even this time investors see a mild improvement to 8.7%. Last week’s upbeat US Nonfarm Payrolls (NFP) has delighted Fed policymakers to keep up with their extreme policy tightening measures. One factor that Fed policymakers should be worried about is lower Average Hourly Earnings along with the US employment data.

The combination of soaring price pressures, which have devalued the paychecks of the households, and lower Average Hourly Earnings will create more troubles for them. Lower-income will trim the consumption and savings, and eventually the overall demand. In the later stages, a slippage in the overall demand may impact the greenback.

On the Indian rupee front, a decent recovery in the Indian indices from the last week is indicating that the Foreign Institutional Investors (FIIs) are returning to Dalal Street. This may fetch significant fund flows into the Indian market and may support the Indian rupee ahead. Also, the kick-start of the earnings season for the first quarter of FY22 may strengthen the Indian rupee bulls.

Meanwhile, the oil prices are holding themselves on higher levels as investors have shifted their focus to the supply worries. The oil cartel is unable to produce more oil except the Saudi Arabia and United Arab Emirates (UAE), which are already operating at maximum capacity levels.