USD/INR: Indian Rupee Pares Losses after Inflation Surprise

USD – INR rates from the previous four days:

Indian Rupee pares losses after inflation surprises, breaking a stream of four consecutive losing days. The USD/INR exchange rate settled 24 paise lower at 71.81 on Thursday. During the early Asia trading hours and after the London open, Rupee was seen quote lower around 71.852 against the US dollar.

India’s CPI inflation data showed consumer prices rising by 4.62% in October, year-on-year base. Beating the market consensus and above the 3.99% prior reading. Reserve Bank of India’s (RBI) medium-term inflation target stands at 4%. This is the first time in 16 months consumer prices rose at a faster peace than RBI’s forecast.

The uptick in inflation should slow down RBI’s ambitions to cut interest rates in December. However, the lackluster economic growth of India is enough for the RBI to keep its current easing measures in place.

The main component of the CPI inflation reading is the Consumer Food price inflation. This counts around 50% of the inflation basket. Recent numbers showed Consumer Food price beating the consensus and increased by 7.89% versus 5.1% previous reading.

The benchmark equity index NIFTY 50 traded higher on Thursday, settling at 11872. However, during early Asia trading hours NIFTY 50 gaped higher touching a high of 11973. The Indian 10-year government bond yield was quoted unchanged at 6.514 percent.

The dollar index, which gauges the greenback’s strength against a basket of major currencies closed down on Thursday settling at 98.14.

The chances of a trade deal agreement by year end are narrowing and any other delays can send the wrong signal to the financial markets.

USD/INR Technical Pattern

On the technical front, the USD/INR exchange rate falls short of challenging the 2019 high at the 72.42 level on 3 September. The recent rally that started since the beginning of last week has definitely resuscitate the long-term USD/INR bullish trend.

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