- Indian Rupee (INR) rises after inflation data
- Indian inflation is rose to 5.55%
- US Dollar (USD) is holding steady ahead of the FOMC rate decision
- The Fed is expected to leave rates on hold
The US Dollar Indian Rupee (USD/INR) exchange rate is falling after gains yesterday. The pair rose 0.06% in the previous session, settling on Tuesday at 83.96. At 16:00 UTC, USD/INR trades -0.04% at 83.36 and trades in a range of 83.35 to 83.47.
Indian retail inflation rose at its fastest pace in three months in November amid high food prices and expectations that the Reserve Bank of India will not ease interest rates anytime soon.
The annual retail inflation increased to 5.55% in November which was up from 4.87% annually in October. However, this was below the rate of 5.7% forecasted by economists.
Food inflation, which accounts for almost half of the consumer price basket, rose to 8.7% in November, up from 6.61% in October.
Core inflation, which doesn’t include food or fuel was estimated to be around 4.05% to 4.2% in November, down slightly from 4.2% to 4.28% in October.
The inflation rate was within the RBI’s upper band of tolerance of 2% to 6% for a third straight month. The RBI is not expected to raise interest rates and could start easing policy in the second half of 2024.
The US Dollar is falling against the Rupee but is holding steady versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.02% at the time of writing at 103.87, after losses in Tuesday.
The US dollar is holding steady as investors look ahead to the Federal Reserve interest rate decision later today.
The Fed is widely expected to leave interest rates on hold at the 22-year high or 5.25% to 5.5%. This would mark the third straight month of leaving interest rates on hold, which could indicate the end of the rate hiking cycle.
With this in mind, attention will turn to forward guidance – when the Federal Reserve may start cutting interest rates next year and to what extent they intend to cut interest rates.
The Fed will provide updated projections for growth and inflation as well as the dot plot, which will give the market the Fed’s plan for the future path of interest rates.
The meeting comes after data yesterday showed that inflation cooled to 3.1% and after robust nonfarm payroll figures on Friday. As a result, the Fed may push back on rate cut bets as the market price is in around 100 basis points of cuts next year.
A hawkish shining Federal Reserve could best the US dollar against its major pairs.
