• Indian Rupee (INR) rises in risk-on trade
  • A jump in oil prices limits gains
  • US Dollar (USD) falls after cooler than forecast CPI data
  • FOMC rate decision is due tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower on Tuesday, snapping three days of gains.  The pair rose 0.27% yesterday, settling at 82.63. Today, at 15:30, USD/INR trades -0.3% at 82.38, trading in a range between 82.38 to 82.92.

The Rupee is pushing higher in risk-on trade following EU S inflation data. Riskier assets and currencies, such as the rupee, are in demand on signs that inflation and the world’s largest economy are cooling.

Games in the rupee are being limited by a jump in oil prices. Cooling US inflation and the weaker U.S. dollar have sent oil prices 2% higher. At the time of writing, West Texas Intermediate trades +2.2% at $74.75.

The US Dollar is falling across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at -3.15% at the time of writing at 103.70, snapping a two-day winning run.

The US dollar is falling sharply lower after the release of cooler-than-expected US inflation data. Inflation, as measured by the consumer price index, fell to 7.1% year on year in November, down from 7.7% annually in October. This was below forecasts of 7.3%.

Core inflation which strips out more volatile items such as food and fuel fell to 6% year on year, down from 6.3% and below forecasts of 6.1%.

The data is fuelling expectations that the US Federal Reserve will adopt a more dovish stance towards monetary policy going forward. The data comes ahead of tomorrow’s Federal Reserve interest rate decision, where policymakers are expected to agree on a 50 basis point rate hike after four straight meetings of 75 rate hikes.

With inflation showing a cooling trend, some Fed policymakers could conclude that it could soon be time to talk about pausing rate hikes.