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INR bank notes
  • Indian Rupee (INR) resilient as Index of Industrial Production +22%
  • Indian retail inflation declines 4.29% in April
  • US Dollar (USD) jumps as US CPI surges 4.2% in April
  • Speculation builds that the Fed will tighten policy sooner

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Wednesday paring losses from the previous session. The pair settled -0.11% lower on Tuesday at 73.37. At 14:30 UTC, USD/INR trades 0.14% higher at 73.47.

The Rupee eased lower as retail inflation for April weakened to 4.29%. Meanwhile the Index of Industrial production surged over 22% year on year in March thanks to the low comparison last year.

Across the full year industrial production contracted -8.6% in 2020/1 compared to a 0.8% contraction in 2019/20. Meanwhile manufacturing surged and mining also grew firmly 6.1%.

Inflation rose at a slower pace than expected in April owing to softer food prices. Inflation in March was at 5.5% a four month high but still within the Reserve Bank of India’s 2-6% tolerance band.

The weaker inflation will be well received by the central bank, enabling them to continue with supportive measures amid the ongoing covid crisis.

The US Dollar is bounding higher across versus both the Rupee and its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.2% at the time of writing at 90.35 as it picks up mildly from 2 month lows.

The US Dollar is reacting to data which revealed that US inflation roared higher in April. Inflation, as measured by the consumer price index jumped 4.2% year on year. This was the highest CPI reading in 13 years. Analysts had been expecting a 3.6% increase. The reading was 2.6% in March.

Core inflation, which removes more volatile items such as food and fuel also surged higher to 3%.

The data is prompting speculation that the Federal Reserve will be forced to tighten monetary policy sooner than initially expected. Whilst this is good news for the US Dollar, the US stock market is once again coming under pressure.