- Indian Rupee (INR) falls as inflation is expected to rise
- RBI could be prompted to act again to rein in inflation
- US Dollar (USD) eases from 20-year high
- US Fed speakers due
The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Tuesday for a fifth straight session. The pair settled +0.53% higher on Monday at 77.33. At 10:30 UTC, USD/INR trades +0.05% at 77.40 a new record high.
India’s retail inflation is expected to have soared to an 18-month high in April, boosted by rising fuel and food prices and remaining above the Reserve Bank of India’s upper tolerance band for a fourth straight month.
Inflation in India is set to rise to 7.5% year on year in April, up from 6.95% in March, according to a Reuters poll of 45 economists. If inflation comes in at this level, it would mark the highest inflation rate since October 2020 and would still be well above the RBI’s 6% limit.
The high inflation outlook prompted the RBI to raise its repo rate for the first time since 2018, lifting it by 40 basis points to 4.4% in a surprise meeting last week. The move by the RBI came just ahead o the Fed’s 50 basis point rate hike last week.
The US Dollar is across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.05% higher at writing at 103.70, after briefly rising to a 20-year high over 104.00 yesterday.
The USD surged in the previous session, boosted by safe-haven flows and hawkish Fed bets. Risk assets sold off, and investors sought out the safe-haven properties of the USD amid risks of slowing global growth.
Today the US dollar is easing from 20-year highs after comments from Fed speaker Bostic who said that he believed that a 75 basis point hike wouldn’t be necessary, calming market fears that an aggressive Fed could tip the economy into recession.
There is no high-impacting US data due to be released today. Instead, more Fed speakers are due to hit the airwaves.