• Indian Rupee (INR) rises after RBI hikes rates by 50 bps
  • More hikes are expected
  • US Dollar (USD) edges lower versus majors
  • Core PCE rose by more than expected

The US Dollar Indian Rupee (USD/INR) exchange rate is falling, paring gains from the previous session. The pair rose yesterday, settling +0.07% higher at 81.46, trading in a range between 81.46 to 81.96. At 16:00 UTC, USD/INR trades -0.1% at 81.32.

The Reserve Bank of India raised its benchmark repo rate on Friday by 50 basis points. This was the fourth consecutive increase by the central bank as it continues to battle high inflation. The repo rate now sits at 5.9%, after 5 0f the 6 monetary policy members voted in favor of the hike.

The RBI has raised interest rates by a total of 190 basis points since May when it announced its first unscheduled rate hike. However, inflation remains stubbornly high.

Economists expect further tightening from the central bank, with several forecasting that the terminal rate will be 6.5% which would suggest another 60 basis points of rate hikes.

The US Dollar is falling across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at -0.16% at the time of writing at 112.03 after booking losses of 1.1% in the previous session. Across the week, the US dollar index is due to lose 1.3%.

The US dollar is easing back from 20-year highs, despite a bout of stronger than expected today.

Today, US core PCE, the Federal Reserve’s preferred measure for inflation, rose by more than expected to 4.9% year on year in August, up from 4.7% in July.

Meanwhile, consumer spending also rose by more than forecast at 0.4% month on month, up from 0.2% .

The data comes after jobless claims yesterday were stronger than expected at 193,000, down from 215,000 in the previous week.

All this data gives support to a more hawkish Federal Reserve, with the market now pricing in a 61% probability of a 75 basis point rate hike in November.