inr-bank-notes - INR
  • Indian Rupee (INR) falls as wholesale inflation drops
  • RBI could shift attention to growth
  • US Dollar (USD) falls ahead of the FOMC rate decision
  • Expectations are for a 0.5% rate hike.

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Wednesday, pairing losses from the previous session.  The pair fell 0.3% yesterday, settling at 82.37. Today, at 11:30, USD/INR trades +0.17% at 82.51, trading in a range between 82.40 to 82.71.

The Rupee is falling after data showed that India’s annual wholesale price inflation (WPI) crews two its lowest level in 21 months, suggesting that price pressures are beginning to ease. Food, energy, and manufactured products saw prices fall, suggesting that the impact of the spike in prices due to the Russian war is starting to ease.

WPI was 5.85% year on year, below the 6.5% forecast and down from 8.39% in the previous month. This was the lowest level for WPI since February 2021 and could encourage policymakers to shift their monetary policy focus toward growth.

The US Dollar is rising against the Rupee but falling versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at -0.09% at the time of writing at 103.88, extending losses from yesterday.

The US donor fell sharply yesterday to a six-month low after inflation data shows that consumer prices cooled by more than expected in November. US CPI drops to 7.1%YoY, down from 7.7% in October. Core inflation also fell play more than forecast to 6%.

Cooler inflation raised expectations that the US Federal Reserve will slow the pace of rate hikes going forward.

Today all eyes are on the Fed’s interest right decision. The US central bank is expected to raise interest rates by 0.5% to 4.5%, after full consecutive meetings of 0.75% rate hikes. The Fed will also give updated growth and inflation forecasts. Any downward revision to inflation could pull the USD lower.

On the other hand, if the Fed shows that the terminal rate is forecast to be over 5%, Higher interest rates for longer, which could lift the US dollar.