inr-bank-notes - INR
  • Indian Rupee (INR) falls as inflation cools
  • Indian retail inflation was 5.09% down from 5.1%
  • US Dollar (USD) rises versus its major peers
  • US inflation was hotter than expected

The US Dollar Indian Rupee (USD/INR) exchange rate is rising for a third straight day. The pair rose 0.05% in the previous week, settling on Monday at 82.77. At 17:00 UTC, USD/INR trades +0.02% at 82.80 and trades in a range of 82.73 to 82.79.

The Indian rupee is struggling against the stronger U.S. dollar despite Indian retail inflation rising at a faster pace than expected owing to higher food prices.

Annual retail inflation eased to 5.09% in February, down from 5.10% in January, but was still higher than the 5.02% forecast by Reuters.

Food inflation, which accounts for over 50% of the overall consumer price basket, rose to 8.66% last month, compared to 8.3% in January.

Retail inflation remains within the RBI’s 2% to 6% band, although uncertainties surrounding food prices could worry policymakers.

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +0.22% at the time of writing at 103.00 as it attempts to recover some of last week’s losses.

The U.S. dollar is gaining against its major peers after February’s hotter-than-expected US inflation data.

The data shows that the consumer price index unexpectedly rose to 3.2% year on year, up from 3.1% in January and ahead of the expected 3.1%. On a monthly basis, CPI rose 0.4%, which is in line with expectations, but it also rose from 0.3% in January.

Meanwhile, call CPI, which discounts more volatile measures such as food and fuel, eased by less than expected, falling to 3.8% year on year, down from 3.9%, which economists had expected a full to 3.7%. The data shows that inflation is proving to be sticky and challenging for the Fed to return to its 2% target. This is not the type of report that would accompany a rate cut from the Federal Reserve.

According to the CME fed watch tool, the market is now pricing in a 65% probability of a rate cut in June, down from 90% just a month ago.