- Indian Rupee (INR) falls after gains yesterday
- RBI expects inflation to stabilize going forwards
- US Dollar (USD) rises after 5-days of losses
- FOMC minutes are due later
The US Dollar Indian Rupee (USD/INR) exchange rate is rising, recovering from losses yesterday. The pair fell -0.24% in the previous session, settling on Tuesday at 82.82. At 14:00 UTC, USD/INR trades +0.15% at 82.95 and trades in a range of 82.82 to 82.96.
The Indian Ruppe trades under pressure as inflation in India is expected to stabilize and could even cool going forward, according to the Reserve Bank of India in its February bulletin. However, the central bank also warned that the renewed pressures from cereals and proteins shouldn’t be ruled out.
The update came after the country’s retail inflation eased to a three-month low of 5.1% in January, down from 5.69% in December and 5.55% in November. Core inflation is also at its lowest point since October 2019, and wholesale price inflation remains in deflation, which bodes well for continued cooling in consumer prices.
With inflation stabilizing, growth is expected to be stronger in 2024, with the Indian economy expected to sustain the momentum achieved in the first half of 2023-2024.
The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +0.07% at the time of writing at 104.13, after yesterday’s losses.
The US dollar is rising, recovering some of yesterday’s steep losses as investors look ahead to the release of the minutes from the January FOMC meeting, which could provide more clues about the central bank’s rate outlook.
Last week, data showed that US inflation remains sticky, which fueled investors to push back expectations that the Fed would start cutting interest rates in March. According to the CME Fed watch tool, markets are now pricing in the first rate cut in June. Investors are also expecting around 94 basis points worth of cuts by the Federal Reserve this year, which is still above the three 25 basis point rate cuts that the Fed has signalled.
Markets will use the minutes of the latest fed policy meeting to provide further clarity on the outlook for US rates.
Hawkish minutes could see investors push back further on rate cut expectations. However, any sense of a more dovish Federal Reserve could see the US dollar tumble lower.
