numbers-and-inr-currency-symbol - INR
  • Indian Rupee (INR) falls despite hawkish RBI expectations
  • Retail inflation rose 7% in August
  • US Dollar (USD) jumped after inflation was hotter than expected
  • US PPI due tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Tuesday after losses in the previous session. The pair settled -0.3% yesterday at 79.35. At 11:00 UTC, USD/INR trades +0.19% at 79.50 .

The Indian Rupee fell on the back of USD strength and on the prospect of more aggressive rate hikes from the Federal Reserve. Meanwhile, in India, expectations are rising that the Reserve Bank of India could raise interest rates by another 50 basis points later this month as inflation pushed above the central bank’s upper tolerance level again in August.

Retail inflation rose 7% annually in August, up from 6.71% in the previous month. This was above the 6.9% forecast. The next RBI meeting is on September 30 and comes as the growth outlook remains resilient, which means that the RBI can focus on inflation.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +1.15% at the time of writing at 109.55, reversing losses from the previous session.

The US dollar rose strongly after the release of US inflation which was higher than analysts were expecting at 8.3% year on year in August. This was down from 8.5% YoY in July and 9.1% in June. Analysts had forecast a drop in inflation to 8.1%.

Meanwhile, core inflation, which strips out the more volatile items such as food and fuel, rose to 6.3% annually, well up from 5.9% in July and significantly higher than the 6% forecast.

The data comes ahead of the Federal Reserve’s FOMC rate decision next week, where the US central bank is expected to hike rates by 75 basis points. The data has completely removed any expectations of a 0.5% hike.

Looking ahead, attention is now turning towards the wholesale inflation reading, PPI, which is expected to rise 7.1% annually in August, a slight decrease from 7.6% in July.