• Indian Rupee (INR) falls after small gains yesterday
  • RBI rates cut bets are being pushed back
  • US Dollar (USD) rises after hotter-than-forecast inflation data
  • Fed is less likely to cut rates soon

The US Dollar Indian Rupee (USD/INR) exchange rate is rising after small losses yesterday. The pair fell -0.04% in the previous session, settling on Monday at 82.97. At 14:00 UTC, USD/INR trades +0.17% at 83.11 and trades in a range of 82.97 to 83.11.

The Indian rupee is falling against the stronger U.S. dollar despite the market showing that investors are pushing back their expectations for the start of rate cuts by the Reserve Bank of India.

Following the hawkish tone of the latest monetary policy statement, the overnight index swap market has seen rate cut expectations being delayed by two months to the third quarter of the next fiscal year.

Last week, the Reserve Bank of India left its policy rate unchanged for a sixth straight meeting and reiterated its commitment to lowering inflation to the 4% target. However, Governor Daz noted that the last mile of disinflation is always the hardest.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +0.4% at the time of writing at 104.59, after gains in the previous session.

U.S. dollar is rising after US inflation data was hotter than expected causing the market to reassess the likelihood of an early rate cut by the Federal Reserve.

Consumer prices rose 3.1% year on year in January, down from 3.4% in December but ahead of the 2.9% that analysts had forecast. On a monthly basis, CPI rose 0.3%, which was above the 0.2% forecast.

Meanwhile, core inflation, which excludes more volatile items such as food and energy costs, increased 3.9% annually, in line with December but above the 3.7% forecast. On a monthly basis, core CPI rose 0.4%, ahead of the 0.3% that analysts had forecasted.

The figures reduce the chances that the Federal Reserve will start cutting interest rates anytime soon, and further acceleration in inflation could reignite expectations that the Fed could even hike rates.

According to the CME Fed watch tool, the market is almost certain that the Fed won’t hike rates in the March meeting and only sees a 30% probability of offering a rate hike or a rate cut in May.