USD/INR posts small daily losses, steadies above 71
- Improving market sentiment helps EM currencies find demand.
- US Dollar Index posts small daily losses, stays above 97.50.
After touching its highest level since January 9th at 71.26 earlier in the day, the USD/INR pair lost its traction and fell to a daily low of 71.069 before going into a consolidation phase. As of writing, the pair was down 0.08% on a daily basis at 71.105.
Positive sentiment helps EM currencies recover
Easing concerns over the Coronavirus with Chinese officials voicing their commitment to containing the outbreak seems to have helped the market sentiment improve on Wednesday. The risk-sensitive emerging market (EM) currencies, such as the INR, took advantage of the shift in the market mood and erased a portion of the losses suffered against the USD during the first half of the week.
On the other hand, the lack of significant fundamental drivers caused the greenback to stay relatively quiet on Wednesday and allowed the INR's valuation to drive the pair's action.
The US Dollar Index, which tracks the USD's performance against a basket of six major currencies, continue to fluctuate near the 97.50 mark for the third straight day on Wednesday.
Earlier in the day, the monthly data published by the Federal Reserve Bank of Chicago showed that the National Activity Index dropped to -0.35 in December from 0.41 in December to make it difficult for the buck to find demand. The IHS Markit's Manufacturing and Services PMI data on Friday could cause the USD to show a noticeable reaction.
Technical levels to watch for