inr-bank-notes - INR
  • Indian Rupee (INR) gives back yesterday’s gains
  • Indian inflation is expected to rise to 5.87%
  • US Dollar (USD) falls versus major peers
  • US CPI data is due tomorrow

The US Dollar Indian Rupee (USD/INR) exchange rate is rising after losses yesterday. The pair rose 0.08% in the previous week, settling on Tuesday at 83.10. At 10:00 UTC, USD/INR trades -0.14% at 82.99 and trades in a range of 82.99 to 83.18.

The Indian rupee is edging lower ahead of key inflation data today. Analysts are expecting India’s retail inflation to edge higher in December as food prices increase. Still, it is likely to remain within the Reserve Bank of India’s target range for a fourth straight month.

Food prices, which account for around half of the inflation basket, rose in November and remained elevated last month as well.

As measured by the consumer price index, inflation is expected to increase to 5.87% in December, up from 5.55% in November.

The RBI raised the repo rate a total of 250 basis points since May 2022 to cool inflation; however, it has left monetary policy unchanged since April last year as inflation cooled.

The US Dollar is rising against the Rupee but is falling versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades -0.15% at the time of writing at 102.57, after gains yesterday.

The US dollar is edging lower giving up earlier gains As investors continue to way up the federal reserves outlook for interest rate cuts after strong U.S. jobs data on Friday and ahead of key US inflation data tomorrow.

The U.S. consumer price index is expected to show that inflation rose 0.2% in December and 3.2% year on year, up slightly from November.

If CPI data comes in hotter than expected, this could see the market rein in Federal Reserve rate cut bets as the Fed is likely to delay any policy pivot.

However, should the data show further evidence that inflation in the US is cooling, then this could help revive Federal Reserve rate cut bets and pull the US dollar lower.

According to the CME fed watch tool, the market is pricing in around a 65% probability of a rate cut in March.