• Indian Rupee (INR) rallied 0.3% last week
  • Inflation declines to 4.06%, IIP +1%
  • US Dollar (USD) declines on safe haven outflows
  • US markets closed for public holiday

The US Dollar Indian Rupee (USD/INR) exchange rate is edging higher at the start of the week, after declining across the previous week. The pair shed -0.3% across the previous week settling at 72.58. At 11:15 UTC, USD/INR trades +0.06% at 72.62.

The Indian Rupee is holding onto the majority of gains from the previous week underpinned by improving macro economic data.

Indian retail inflation, as measured by consumer price index eased to 4.06%, the lowest level in 16 months. Analysts had been expecting inflation of 4.4%. The weaker inflation was primarily owing to lower food inflation. This is the second straight month that CPI data has come within the Reserve Bank of India’s upper margin of 6%

Separately factory output as measured by Index of Industrial Production revealed growth of 1% in December. Industrial growth so far in the fiscal year 2020-21 (April – December) has contracted -13.5%. The mining sector has been the biggest drag contracting -4.8% on the year, whilst manufacturing has grown 1.6%.

Looking ahead balance of trade data is due shortly.

The US Dollar is marginally stronger versus the Indian Rupee.  However, it trades lower versus its major peers as investors sellout of the safe haven currency.

The US Dollar Index, which measures the greenback versus its major peers trades -0.15% at the time of writing.

Optimism surrounding a vaccine led global economic recovery and hopes of additional US stimulus is lifting the mood in the market.

With Trump’s impeachment trial now over all attention will be on the US fiscal stimulus. US House Speaker Nancy Pelosi said that she hopes to have the Democrats covid relief plan approved by the end of this month.

The US stock markets are closed today and there is no high impacting US data due for release. Later in the week US FOMC meeting minutes, US retail sales and PMI data could drive the US Dollar.