- Indian retail inflation +6.69% missing forecasts
- Indian covid cases near 5 million
- US Dollar (USD) is out if favour in risk on trading
- FOMC comes into focus, no rate change expected
The US Dollar Indian Rupee (USD/INR) exchange rate is advancing on Tuesday after posting mild losses in the previous session. The pair settled on Monday -0.08% at 73.37. At 11:30 UTC, USD/INR trades +0.3% at 73.60.
Indian retail inflation eased by more than what market participants were expecting in August, adding pressure to the Rupee.
Retail inflation printed at 6.69% in August. Whilst this was lower than what Reuters poll forecast, it was above the Reserve Bank of India’s medium-term target for a fifth straight month. This means that the RBI will have little room to cut rates when it meets for its October meeting.
Also adding downward pressure to the Rupee is the rising number of covid cases. At least 17 members of the Indian Parliament have tested positive for covid-19 as the total number of infections soar to 5 million cases.
Meanwhile a rallying equity market offered support to the currency. The Sensex trades +0.75% higher amid a broad risk on mood in the financial markets.
Looking ahead investors will focus on balance of trade data which is due to be released later today.
The US Dollar is trading higher versus the US Dollar but lower versus its major peers on increased safe haven outflows. As risk sentiment rises investors are broadly selling out of the safe haven US Dollar and targeting riskier currencies and assets.
Vaccine news continues to lift the market mood, as does deal making on Wall Street and upbeat data from China. Chinese industrial production rose +5.6% year on year, whilst Chinese retail sales rose for the first time this year.
Attention will now turn towards the US Federal Reserve monetary policy announcement due tomorrow. The Fed is not expected to adjust monetary policy but could provide further clarification on the new average inflation target.