The Indian rupee is set to regain some strength at the start of a fresh trading week over news reports that suggest a possible peaking of new COVID-19 infections may have peaked across Delhi and Mumbai, offering some relief even as India struggles to contain the second wave of the coronavirus pandemic. At the time of writing, USD/INR is trading at around 74.76.

Despite India seeing record high increases in the number of daily cases over the past several days, the possibility of the toll peaking in the national capital and the financial capital of the country could mean that the latest wave could be brought under control soon. This news is offering some support to the Indian currency and helping drive bearish moves in USD/INR in early trading on Monday.

In addition, USD/INR has also come under pressure owing to a weakness in the US dollar ahead of the latest FOMC meeting scheduled for this week. Markets are concerned that the Fed could continue with its monetary easing and dovish outlook into the near future even as the US economy shows signs of rapid recovery from the ongoing coronavirus crisis. A dovish monetary policy keeps the country’s currency under pressure as it has an adverse effect on investor confidence.

Going forward, fundamentals are going to dictate moves in this currency pair in the near term. On the one hand, the US dollar is likely to experience volatility on the Fed’s announcement, especially if it offers any clues on when officials could change their outlook towards monetary easing. On the other hand, India’s handling of the COVID-19 crisis will also remain in focus, especially if the situation continues to worsen despite assistance pouring in from its international allies.