• Indian Rupee (INR) falls as inflation growth slows
  • Indian consumer prices rise 5.3% YoY
  • US Dollar (USD) falls post inflation data
  • US CPI rises at a slower pace

The US Dollar Indian Rupee (USD/INR) exchange rate is pushing higher on Tuesday, extending gains for a second straight session. The pair gained 0.06% in the previous session, settling on Monday at 73.56. At 12:30 UTC, USD/INR trades +0.05% lower at 73.59.

The Indian Rupee is slipping lower despite the Nifty 50 reaching a fresh record high. The index was boosted by automobile and banking stocks and a 25% surge in Zee Entertainment.

Instead the focus was on macro data after figures revealed that India’s retail inflation cooled to a four month low in August. Softer food prices as supply side constraints eased amid the reopening helped slow price rises.

Consumer prices rose 5.3% in August, below July’s reading of 5.59% and below the 5.6% forecast.

The news is likely to be well received by the Reserve Bank of India. The central bank is keen to keep its accommodative stance  to focus on economic growth following the pandemic.

The US Dollar is pushing holding onto gains versus the Rupee. However, the greenback is falling versus 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 92.46, extending gains from last week.

The US Dollar has fallen sharply lower amid signs that inflation in the US is starting to soften. The closely watched consumer price index, CPI rose 0.3% month on month in August, down from 0.5% in July and rising more slowly than the 0.4% increase forecast.

Core inflation, which strips out more volatile items such as food and fuel rose just 0.1% month on month and 4.0% on an annual basis, down from 4.3%. The slowing pace of price rises gives the Federal Reserve more breathing space. Investors are pushing back on bets that the Fed will move to taper sooner sending the US Dollar lower.

Attention will remain on the economic calendar tomorrow with the release of US retail sales.