• Indian Rupee (INR) rises adding to gains from last week
  • Indian domestic inflation set to rise to 5.8%
  • US Dollar (USD) rises versus major peers as inflation expectations soar
  • No major US data is due today

The US Dollar Indian Rupee (USD/INR) exchange rate is moving lower on Monday extending losses from the previous week. The pair fell -0.26% last week, settling on Friday at 74.27. At 11:30 UTC, USD/INR trades -0.29% at 75.24.

Indian retail inflation is expected to rise to a six-month high in December. A Reuters survey of 41 economists revealed that Indian retail inflation is expected to have risen to 5.8% last month, up from 4.91% in November. The rate has spent over two years above the Reserve Bank of India’s medium-term target of 4.0%.

Higher telecom tariffs and rising energy prices are lifting inflation towards the upper band of the RBI’s tolerance level, raising the potential of a rate hike by the central bank. The RBI has kept the repo rate at 4.0% for a nineth straight policy meeting as it focuses on economic growth as India still faces challenges from COVID and pandemic restrictions.

The US Dollar is holding is trading lower versus the Rupee but higher versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.18% at the time of writing at 95.89.

The US Dollar fell last week after weaker than expected USA non-farm payroll data. The closely watched US jobs data showed that 199,000 new jobs were added to the US economy in December, roughly half of the 400,000 that analysts had been expecting, sending the greenback lower.

However, it wasn’t all bad news, the unemployment rate fell to 3.9% down from 4.1% and wage growth jumped to 4.7%, well ahead of the 4.2% forecast. However, the firmer wage growth is boosting expectations of a sooner move by the Federal Reserve to raise interest rates.

There is no high impacting US economic data due for release today. Instead investors are looking ahead to inflation data later in the week which could cement expectations of a rate hike.