• Indian Rupee (INR) falls as inflation is set to ease in February
  • Oil prices rise
  • US Dollar (USD) rises as inflation jumps
  • US consumer confidence data due

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Friday, snapping a three-day losing run. The pair settled -0.09% higher on at 76.29. At 11:30 UTC, USD/INR trades +0.42% at 76.61. The pair is on track to gain 0.26% this week, the third straight week of gains.

The India Rupee edging lower as near tern inflation expectations eases. Indian retail inflation is expected to have cooled in February owing to lower food prices, however, this is likely to be short-lived as surging oil prices will push inflation much higher in the coming months.

Oil prices have jumped 12% in March alone and have almost doubled since December last year. This in turn will push fuel prices higher and ripple out across the economy. Consumer prices are expected to have slipped to 5.93% in February year on year down from 6.01% in January, according to a Reuters poll.

So far the Reserve Bank of India has focused on growth over inflation. However, with prices set to surge, they could be forced to hike rates sooner.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades +0.17% at the time of writing at 98.68 adding to strong gains in the previous session.

The US dollar pushed higher yesterday following the release of US inflation data. The data showed that the cost of living in the US jumped to a fresh 40 year high of 7.9%. This was up from 7.5% recorded in January. Rising fuel and food prices pushed the inflation index higher, mounting pressure on the Fed to act.

The Federal Reserve will meet next week to announce their interest rate decision. The rise in inflation and surging oil prices suggest that inflation will continue rising. Whilst a 25 basis point rate hike is expected next week, the market will be watching carefully to see if the Fed intends to hike faster across the year.