Mr. Sriram Iyer, Senior Research Analyst at Reliance Securities
The Indian Rupee appreciated for a 2nd week in a row against the dollar this Monday, supported by dovish statement from the Federal Reserve Chairman Jerome Powell.
The Rupee also took support from dollar inflows and absence of the Reserve Bank of India's intervention in the spot market.
Furthermore, the dollar index was weak this and lent support.
The Dollar during the week after a dovish speech from Jerome Powell last week and after weak data during the whole.
A report on the U.S. labour market missed expectations by a wide margin, while U.S. consumer confidence fell to a six-month low in August as worries about soaring COVID-19 infections and higher inflation dimmed the outlook for the economy.
The currency also got a lift from upbeat equities with the benchmark BSE Sensex and the broader NSE index ended at fresh record highs this week.
Most of the EM and Asian currencies ended stronger against the dollar on Thursday and lent support to the local unit.
However, further appreciation above 72.90 levels was capped on importing buying dollars to cover their payables and dollar short covering.
On the data front, Merchandise exports stood at $33.14 billion in August, down from $35.43 billion in the previous month. However, it jumped over 45% from $22.83 billion a year earlier.
Imports rose to $47.01 billion in August from $46.40 billion in July and surged 51.5% from $31.03 billion a year earlier, indicating strong domestic demand.
Trade deficit in August widened to $13.87 billion from $10.97 billion in the previous month and $8.2 billion a year earlier.
Additionally, India's Gross Domestic Product (GDP) grew by 20.1% in the first quarter of 2021-22, compared to the 24.4% contraction recorded in the same quarter a year ago, but economic activity remained well-below pre-pandemic levels thanks to the second wave of COVID-19.
The Federal Reserve Chairman Jerome Powell said last week that more labour market data was needed before they could begin scaling back bond purchases.
So naturally, tonight nonfarm payroll and jobs number over the next couple of months will be important.
Till the data markets could remain range bound.
The Labour Department's non-farm payrolls report for August is expected to show 728,000 jobs were created, according to a Reuters poll.
If the number is weaker than the poll, we could see some downside in the dollar and vice versa.
Apart from that Economic calendar is thin next week, but the major trigger point could come from the European Central Bank Meeting (ECB) next week.
Additionally, domestic IIP number are also expected next week and could move the domestic markets next week.
On the charts, the USDINR spot pair key support is at 72.90 levels and a break below could pull prices to 72.55 levels. On the upside, major hurdles now are at 73.25 and 73.30 levels and a break above could push the index to 73.60.
Internationally, dollar index resistance is at $92.65 and will a need a sustained trade above the level to push further higher. Support is $92.00 and a break below will test $91.65 immediately. A break below $91.65 could see dollar index test April 2021 level of $91.30.