- Indian Rupee (INR) falls in risk off-trade
- Indian retail inflation is expected to temporarily ease
- US Dollar (USD) rises on hawkish Fed bets after inflation jumped higher
- US FOMC rate decision on Wednesday
The US Dollar Indian Rupee (USD/INR) exchange rate is at the start of the week, adding to gains from last week. The pair gained 0.67% in the previous week, settling on Friday at 78.11. At 10:00 UTC, USD/INR trades +0.04% at 77.14.
The Indian Rupee has refreshed record lows on the market mood sours. Indian shares tumbled over 2.5% lower on Monday as Beijing announced fresh lockdown restrictions and ahead of inflation data later.
All eyes are on Indian inflation data which is expected to show that consumer prices eased slightly in May but remained well above the Reserve Bank of India’s upper tolerance band for a fifth straight month as lower fuel prices offset surging food costs.
The slip back in inflation is expected to be temporary and the RBI remains on track to keeping hiking interest rates.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.04% higher at the time of writing at 104.50 after gaining 1% across last week.
The USD rose across last week after data revealed that US consumer prices unexpectedly increased last week. US CPI inflation data rose to 8.6% year on year in May, up from 8.3% in April. Analysts had been expecting inflation to hold steady at 8.3%. Food prices rose 10% across the month and fuel prices jumped 34%. Rising prices are now spreading across all categories.
The rise in inflation fueled expectations that the US Federal Reserve will need to act more aggressively to rein in inflation, which is now at the highest level since 1981, lifting the buck.
The Federal Reserve will announce its monetary policy decision on Wednesday and is expected to raise interest rates by 50 basis points. However, there is a growing possibility that they could hike rates by 75 basis points.
