- Indian Rupee (INR) supported by better than forecast inflation
- India’s IPO boost
- US Dollar (USD) rallies after soaring CPI data
- Fed sees pressure ramp up to tighten monetary policy
The US Dollar Indian Rupee (USD/INR) exchange rate is pushing higher on Tuesday for a second straight session. The pair gained 0.06% on Monday settling at 74.53. At 16:40 UTC, USD/INR trades +0.1% higher at 74.52.
The Rupee showed some resilience against the surging US Dollar after better than expected retail inflation helped to calm investor nerves. India’s retail inflation rose by less than expected at 6.26%, supporting the view that the central bank could keep policy unchanged, supporting the economy after its second pandemic hit.
Inflation was still above the Reserve Bank of India’s comfort zone of 2-6% for a second straight month, but slowed on a month on month basis. This at least gives the RBI some breathing space.
The US Dollar is trading higher across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.28% at the time of writing at 92.51 heading back towards the recent 3 month high.
Gains in the domestic equities market are also keeping the Rupee buoyant. The closely watched Zomato IPO which opens on Wednesday could see strong US Dollar inflows.
The US Dollar surged after data revealed that the pace of inflation surged again in June. Consumer prices jumped 5.4% year on year in June, up from 5% in May and well ahead of the tick lower to 4.9% that was forecast.
On a monthly basis, prices gained 0.9% in June, the fastest one month jump since June 2008.
These figures will make it harder for the Federal Reserve to continue defending its transitory inflation position and could prompt more policy makers to adopt a more hawkish policy. Investors are betting that the Fed could move sooner to tighten monetary policy and this is lifting the US Dollar.