• USD/INR remains mildly offered at one-week low but bears hesitate of late.
• UK-inspired optimism fades amid a lack of major catalysts, policymakers’ aggression.
• Hawkish Fed bets, strong inflation expectations keep buyers hopeful.
• Hopes of RBI’s intervention, softer oil restrict immediate upside.

USD/INR gradually extends the previous day’s losses as firmer sentiment weighs on the US dollar despite hawkish Fed bets during Tuesday morning in India.

Other than the market’s risk-on mood, mainly due to the receding fears of the UK’s recession, the softer oil prices and an absence of major data/events also weigh on the USD/INR prices of late. Alternatively, hawkish Fed wagers and upbeat US inflation expectations are challenging the pair’s downside moves during a sluggish session.

British Finance Minister’s, also called Chancellor, reversal of earlier policy announcement boosted the market’s hope that London will overcome the impending market collapse. “Under the new policy, most of Truss's 45 billion pounds of unfunded tax cuts will go and the two-year energy subsidy scheme for households and businesses - expected to cost well over 100 billion pounds - will now be curtailed in April,” stated Reuters.

That said, CME’s FedWatch Tool prints a nearly 95% chance of a 75 bps Fed rate hike in November. In doing so, the tool might have taken clues from upbeat comments from US Treasury Secretary Janet Yellen, suggesting a strong US jobs market, as well as upbeat US inflation expectations as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data.

On a different page, India’s heavy reliance on oil and the record deficit helps the INR to cheer softer oil prices. Recently, talks that the White House is up for releasing oil from the US Strategic Petroleum Reserve (SPR) seem to weigh on the WTI crude oil prices. With this, the black gold remains sluggish around a two-week low, close to $84.80 by the press time.

It should be noted that the Reserve Bank of India’s (RBI) latest interventions around 82.40 also exerted downside pressure on the quote.

While portraying the mood, S&P 500 Futures track Wall Street’s gains but the US 10-year Treasury yields retreat to 3.99%, which in turn probes the US Dollar Index (DXY) bears of late.

Given the risk-on mood and the US dollar’s inability to cheer the hawkish Fed concerns amid a lack of major data/events, the USD/INR pair is likely declining towards the 81.80 support.

Technical analysis

The first daily closing below the 10-DMA level of 82.25 in over a month directs USD/INR sellers toward a three-week-old support line near 81.80.