• Indian Rupee (INR) slips as RBI sees inflation falling Further
  • RBI to keep accommodative stance
  • US Dollar (USD) rallies after US retail sales unexpectedly rise
  • Bets rise that the Fed will taper bond purchases

The US Dollar Indian Rupee (USD/INR) exchange rate is pushing higher on Thursday paring losses from the previous session. The pair settled -0.2% higher on Wednesday at 73.44. At 16:30 UTC, USD/INR trades +0.2% lower at 73.58.

The Reserve Bank of India sees the inflation trajectory shifting down more favorably than initially anticipated. The central bank sees the cooling of food prices extending into the third quarter which should contain the levels of inflation. As supply conditions return to normal and productivity gains the bank expects sustained decline in core inflation. This will allow the RBI to maintain its accommodative stance.

Interest rates have been kept at a record low since mid-2020. The RBI vowed to keep rates low until the economy recovery was not only achieved but also maintained.

Retail inflation slipped low to 5.3% in August, year on year.

Separately, India’s exports rose 46% year on year to $33.46 billion showing that the pace of growth in exports has accelerated across the pandemic. Imports are also expected to catch up. However private consumption is still lagging.

The US Dollar is surging higher. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.4% at the time of writing at 92.91, rebounding after yesterday’s losses.

The US Dollar is jumping northwards following an unexpected jump in US retail sales. Retail sales rebounded in August rising 0.7% after falling -1.1% in July. Analysts had expected a decline of -0.7% in retail sales owing to rising Delta covid cases and lower consumer confidence. However, the figures revealed that the US consumer is actually more resilient than expected.

These upbeat numbers have boosted expectations that the Federal Reserve will taper bond purchases when they meet later this month, sending the US Dollar surging.

The greenback appears to be shrugging off the weaker inflation read from earlier in the week and weak non-farm payroll data from earlier in the month.