• Indian Rupee (INR) holds steady after gains last week
  • Indian domestic equities rise to a record high
  • US Dollar (USD) falls rises versus major peers
  • US CPI was hotter than expected

The US Dollar Indian Rupee (USD/INR) exchange rate is holding steady after losses last week. The pair fell 0.3% in the previous week, settling on Friday at 82.85 At 14:30 UTC, USD/INR trades +0.00% at 82.85 and trades in a range of 82.90 to 82.84.

The Indian rupee is holding steady as investors digest India’s latest wholesale price index for December.

Wholesale price inflation rose 0.73% year on year to a nine-month high at the end of last year, mainly on the back of higher food prices. This was, however, slower than the 0.9% increase that economists had expected but was also up from the 0.26 level in November.

Food prices in December rose 5.39% year on year compared with a rise of 4.69% in November. Last week, government data showed that the country’s annual retail inflation rose at the fastest pace in four months in December, also driven by a rise in food prices.

Separately the rupee is being supported by assurgent domestic equities. Indian blue-chip indices hit a record high for a second straight session on Monday, led by IT stocks after better-than-expected results.

The Nifty 50 surpassed 22,000 whilst the Sensex breached the 73,000 level for the first time.

The US Dollar is flat against the Rupee but is rising versus its major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades +0.25% at the time of writing at 102.67.

The US dollar is pushing higher despite the US public holiday in observance of Martin Luther King day.

The US dollar is rising despite a lack of fresh data, and after a flat finish to the previous week, The US dollar ended last week at roughly the same level that it started even after US inflation data coming in hotter than expected.

US inflation ticks higher to 3.8%, up from 3.2%, the the accelerating inflation, failed to spark a concern in the market. Expectations for a March rate cut actually rose.

Interestingly, freight rates continue to rise on the back of increasing tensions in the Red Sea, which means that goods inflation could return with a vengeance.

Strikes in the Middle East by the US and the UK on who’s the rebels in Yemen fairway revived concerns of a wider conflict in the Middle East, which could inflame price growth just as inflation shows signs of subsiding.

While the situation is not yet a red flag for the global economy, the impact on global supply chains could become larger if the crisis drags on.

Looking ahead, the US economic calendar is quiet today and tomorrow, although several spread-fed speakers Could influence the dollar.