USD/INR Forecast: Bond Market Expectations Shift (Video)

(MENAFN- Daily Forex)

• USD/INR surged on Thursday, driven by shifting bond-market expectations in both the U.S. and India.
• With the Federal Reserve cutting rates and engaging in de facto quantitative easing, and India anticipating bond purchases, the pair remains in a bullish long-term uptrend toward 91.

The US dollar has spiked against the Indian rupee during trading on Thursday, but at this point, the one thing that I would point out that's a little bit different here than some of the other pairs that we had seen is that traders are watching the bond markets really closely with both of these currencies.

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After all, we had the interest rate decision come out of the Federal Reserve on Wednesday, which of course rocked the markets as they cut, but it also seems like they've gone into quantitative easing mode, although they're trying to pretend that they're not in quantitative easing mode, as the $40 billion of T-bill purchases every month is supposed to be for the plumbing of the system. Whether or not that's true remains to be seen, but it certainly has put some interest in the bond market again. In India, it looks like there's a lot of optimism that the Indian Central Bank will start buying bonds, and that should drive rates down as well.

Key Levels and Long-Term Trend

Thereby weakening the rupee. We'll just have to wait and see how this plays out, but it is worth noting that the 90 rupee level has offered quite a bit of support, and it looks like we continue to consolidate. In fact, at one point during the trading session on Thursday, we had seen a fresh high. I think we are going to try to get to the 91 rupee level. This is an interesting currency pair because most of the time it's about the Indian central bank trying not to let it move too quickly in one direction or the other, but they're clearly okay with a dollar strengthening against the rupee as we've seen for quite some time, going all the way back to May, actually. You can see that a longer-term trend is extraordinarily bullish. This might be an indictment of the business climate in India. There's a whole conversation to be had about that. But at this point in time, it looks like we continue to grind higher.

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