counting-inr-bank-notes - INR
INR bank notes
  • Indian Rupee (INR) supported by strong Diwali
  • Indian inflation expected to tick lower
  • US Dollar (USD) trades at 16 month high
  • US consumer sentiment & JOLTS jobs data

The US Dollar Indian Rupee (USD/INR) exchange rate is heading higher on Friday, paring losses from the previous session. The pair settled -0.14% on Thursday at 74.29. At 10:00 UTC, USD/INR trades +0.19% at 74.43. The pair is set to gain 0.3% across the week after four straight weeks of declines.

The Indian Rupee rose in the previous session amid growing optimism surrounding the Indian economy after a surge in spending across the festive period. Sales over Diwali, celebrated last week surged to a record $16.8 billion according to investment bank Nomura. This represents a 75% jump from last year and is well above the usual 20% increase.

The sharp rise in spending highlights how economic activity has rebounded from the pandemic. However, there are concerns that prices could start to rise, potentially weighing on the outlook.

Inflation data is due today and is expected to actually show a slight decrease to 4.32%, down from 4.35%. This is well within the Reserve Bank of India’s 2%-6% target.

The US Dollar is trading higher versus across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.03% at the time of writing at 95.20. The US Dollar is set to gain 0.9% across the week in its third straight week of gains.

The US Dollar trades around a 16-month high after inflation surged to 6.2%, the fastest annual increase in 30 years, prompting bets that the Fed could start to hike interest rates sooner.

The Fed has stuck to the verse that inflation is transitory in the latest Fed meeting. However, the markets are questioning whether the Fed will be able to stick to this this.

Looking ahead US consumer sentiment and JOLTS job opening data will be in focus. Expectations are for consumer morale to improve after three months of decline. JOLTS job openings are expected to remain around the 10 million mark.