• Indian Rupee (INR) falls as wholesale prices jump
  • Retail inflation remains in target, for now
  • US Dollar (USD) eases lower paring yesterday’s gains
  • US PPI inflation data due

The US Dollar Indian Rupee (USD/INR) exchange rate is moving higher for a fourth straight day. The pair settled +0.09% higher on Monday at 75.76. At 11:30 UTC, USD/INR trades +0.09% at 75.82.

The Indian Rupee trades under pressure despite wholesale inflation in India accelerating in November. Increases in manufacturing and food prices lifted wholesale inflation to a 16 year high of 14.23%. This was up from 12.54% in October and well above the 11.5%-12% level that analysts were expecting.

The data reflects the rise in costs for firms. The gap between wholesale and retail inflation has grown in recent months as businesses try to absorb the mounting costs.

This is the eighth month that wholesale inflation has remained in double digits. For now retail inflation is around 5%, within the central bank’s 2% -6%.

The US Dollar is trading higher versus the Rupee but is falling versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.17% at the time of writing at 96.15 paring gains from the previous session.

The US Dollar is falling lower a choppy trade continues. The greenback had risen in the previous session as investors bet that the Federal Reserve will be more hawkish than other central banks this week. The Fed meeting kicked off today and the US central bank is widely expected to accelerate the pace at which they taper bond purchases.

Attention is now turning towards US producer prices, which measure inflation at wholesale level. Expectations are for PPI to rise to 9.2% year on year in November, up from 8.6% in October. Given that PPI is considered a lead indicator for consumer price inflation, CPI could well move higher than its current 6.8%.

A strong reading could cement expectations that the Fed will move faster to tighten monetary policy, lifting the US Dollar.