• Indian Rupee (INR) slips as RBI stays pat
  • Inflation forecast revised lower
  • US Dollar (USD) falls versus major peers post NFP
  • 194k jobs added vs 500k forecast

The US Dollar Indian Rupee (USD/INR) exchange rate is pushing higher on Friday extending gains from a third straight session. The pair settled +0.06% on Thursday at 74.80. At 14:30 UTC, USD/INR trades +0.17% at 74.93.

The Reserve Bank of India kept monetary policy unchanged on Friday. Interest rates remain at 4% for the reop rate and 3.5% for the reverse reop rate, record lows, as expected. The central bank reiterated the need to unwind stimulus very gradually in order to support the economic recovery.

The Indian central bank also lowered its full year 2021/22 retail inflation projection to 5.3% from 5.7%. However, the RBI maintained its full year economic growth forecast at 9.5% as consumer spending is expected to pick up in the upcoming festival season.

The US Dollar is gaining ground versus the Rupee. However, it is ticking lower versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.08% at the time of writing at 94.11 after gaining 0.27% in the previous session.

The US Dollar is trading lower following a huge miss in the US non-farm payroll report. Just 194,000 jobs were added in the US in September. This was well short of the 500,000 forecast and down from the upwardly revised 366,000 from August. The unemployment rate fell to 4.8% down from 5.2%. Meanwhile average earnings jumped 0.6%, up from 0.4%.

The data comes as there are 11 million vacancies in the US suggesting that this is very much a supply side issue rather than demand.

The weak number is unlikely to prevent the Fed from moving towards tapering bond purchases next month. In fact the high levels of demand and weak supply could push wage growth up further creating greater inflationary pressures meaning the Fed could be forced to raise interest rates sooner than expected.