USD/INR trades at fresh monthly lows near 71
- Indian government voices committment to revive growth.
- USD recovery in American session limit's pair's losses.
- State Bank of India cut 1-year MCLR rate by 10 basis points.
The USD/INR pair lost its recovery momentum before reaching the 72 handle last week and posted sharp losses on Thursday and Friday. With the rupee capitalizing on upbeat commentary regarding the economic outlook, the pair extended its slide and touched its lowest level since early November at 70.894 on Monday. As of writing, the pair was trading at 71.013, erasing 0.29% on a daily basis.
Earlier in the day, while speaking at FICCI’s Young Leaders Summit in New Delhi, Krishnamurthy Subramanian, India's Chief Economic Adviser, noted that the country's growth potential was still high and added that the government will step up its efforts to revive growth to help the INR find demand.
USD struggles to gather strength ahead of FOMC
On the other hand, the US Dollar Index started the new week on the back foot following Friday's rally and allowed the bearish pressure to remain intact. However, the index erased its daily losses during the American trading hours and turned flat on the day near 96.70 to keep the pair's losses limited for the time being.
The next significant catalyst for the greenback will the Federal Open Market Committee's (FOMC) monetary policy announcements on Wednesday. Previewing this event, "the Fed is widely expected to keep policy rates on hold at the conclusion of the December FOMC meeting on Wednesday," noted ABN AMRO's senior economist Bill Diviney. "The focus for markets will be on changes to the policy statement, the quarterly projections, and Chair Powell’s press conference."
Meanwhile, State Bank of India announced that it cut its one-year marginal cost-based lending rates (MCLR) by 10 basis points to 9.9% but the INR's reaction to this decision was muted.
Technical levels to watch for