indian-rupee-bank-notes - INR
  • Indian Rupee (INR) edges mildly lower
  • Indian inflation rose to 5.03% in February
  • US Dollar (USD) rallies higher on rebounding yields
  • US FOMC next week

The US Dollar Indian Rupee (USD/INR) exchange rate is ticking mildly higher on Friday snapping a three day losing streak. The pair settled -0.05% lower on Thursday at 72.69. At 16:45 UTC, USD/INR trades +0.03% at 72.71.

India’s retail inflation accelerated to a 3 month high in February as fuel prices increased.

According to the ministry of statistics annual retail inflation rose to 5.03% last month, up almost a full percentage point from 4.06% in January. The reading was also ahead of the 4.83% that was forecast by a Reuters poll of economists.

Petrol prices were principally responsible for the jump in inflation with petrol prices in the capital New Delhi up almost 9% year to date.

The Reserve Bank of India’s Monetary Policy Committee kept the benchmark repo rate on hold in February at 4%. The central bank is expected to keep rates on hold again at the April meeting. However, rising inflation poses a risk to the bank’s accommodative policy which it adopted through the pandemic in order  to support the economy.

The RBI cut interest rates by 115 basis points and has kept rates on hold at that level since May.

Meanwhile the US Dollar was pushing higher across the board. The US Dollar Index which gauges the greenback versus its major peers trades +0.25% at the time of writing after three days of declines.

US President Biden signed off on the $1.9 trillion US stimulus package whilst also promising to vaccine all adults in America by the 1st May. As a result, expectations of a faster economic recovery sent US treasury yields much higher, boosting the US Dollar.

Data was also upbeat with US consumer confidence for March jumping to 83 well above the 78.5 forecast and significantly ahead of February’s 76.8.

Attention will now turn to next week when the Fed will announce its monetary policy.