- Indian Rupee (INR) falls after RBI kept dovish stance vs. hawkish Fed
- Indian equities see strong outflows
- US Dollar (USD) rises after higher than forecast inflation data
- US Michigan consumer confidence data due
The US Dollar Indian Rupee (USD/INR) exchange rate is moving higher on Friday for a fourth straight day. The pair settled +0.40 higher on Wednesday at 75.07. At 11:30 UTC, USD/INR trades +0.39% at 75.36. The pair is on track to gain 1% this week.
The Rupee is trading lower, tracing domestic equities southwards. Indian shares closed the day firmly in the red amid concerns of foreign outflows following the jump in US inflation and expectations of a more hawkish Fed.
Expectations that the Fed could move faster to hike rates, comes hot on the heels of the Reserve Bank of India meeting, where the central bank maintained its dovish stance. This has highlighted the divergence between the RBI and the Fed and is dragging on demand for the Rupee.
Foreign investors have sold net $5.58 billion in Indian equities so far this year compared to a net purchase of $5.08 billion in the same period last year.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.3% at the time of writing at 95.85 adding to mild gains from the previous session. The US dollar is on track to gain 0.4% across the week after losing 1.8% in the previous week.
The US Dollar is moving firmly higher as soaring inflation boosted expectations that the Fed will look to aggressively raise interest rates across the year.
Inflation, as measured by the consumer price index jumped to 7.5% year on year in January, its highest level since 1982. This was also up from 7% in December and significantly higher than the 7.3% forecast by analysts.
Following the reading, Federal Reserve policy makers increased the hawkish tone. Expectations are now for the US central bank to raise interest rates by 0.5% in March. Expectations had been for a 0.25% interest rate rise previously.
Looking ahead, US Michigan consumer confidence is in focus, expectations are morale to improve to 67.5 up from 67.2.