- Indian Rupee (INR) rises, adding to gains last week
- The RBI may need to be more cautious due to persistent food inflation
- US Dollar (USD) falls against its major peers
- Fed Chair Powell speaks on Friday at Jackson Hole
The US Dollar Indian Rupee (USD/INR) exchange rate is edging lower on Monday after losses last week. The pair fell 0.08% in the previous week, settling on Friday at 83.88. At 19:00 UTC, USD/INR trades -0.05% at 83.83 and is in a range of 83.89 to 83.94.
The Indian rupee is moving higher in choppy price action amid Asian currencies.
Importers bidding for dollars pulled the rupee off its two-week high before it rose again at the end of the session.
Despite today’s move higher open, the Rupee’s recent gains have largely been limited owing to outflows from local equities and strong dollar demand from local corporations.
Overseas investors have sold a net $2.5 billion of Indian stocks across August so far.
Separately, the Reserve Bank of India said in its monthly bulletin report on Monday that policymakers may have to adopt a more cautious approach to manage their policy should high food prices persist. The fear here is that high food prices threaten to spill over into more generalized price inflation.
Retail inflation fell to a near five-year low of 3.54% in July, but this was largely due to the base effect and as food prices eased from previous highs.
The US Dollar is falling across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at 0.54% at the time of writing at 101.91, after booking losses last week, the fourth straight week of losses.
The US dollar is falling lower at the start of the week, extending losses from the previous four weeks as investors look toward the Jackson Hole symposium later in the week.
The greenback fell to a seven-month low against its major peers on the expectation that the Federal Reserve chair Jerome Powell will signal toward a September rate cut when he speaks on Friday.
Prior to Friday’s appearance, the market will also be digesting minutes from the latest FOMC meeting, which could provide further clues about the pace at which the Fed will be cutting rates.
The markets may be overestimating how far and how fast the Fed is likely to act.
Powell’s speech comes after data last week showed that inflation cooled to a three-year low and after stronger than expected retail sales and consumer confidence helped to calm recession fears.
