inr-bank-notes - INR
  • Indian Rupee (INR) falls to new 18-month lows
  • Domestic equities decline for fourth straight day
  • US Dollar (USD) eases lower ahead of the Fed rate decision
  • US retail sales due before Fed announcement

The US Dollar Indian Rupee (USD/INR) exchange rate is moving higher for a fifth straight day. The pair settled +0.37% higher on Tuesday at 76.04. At 11:00 UTC, USD/INR trades +0.34% at 75.29.

The Rupee is tracing domestic equities lower, which are falling for a fourth straight session as investors look ahead to the Fed rate decision. The blue-chip indices have fallen over 7% from their October all-time highs but are still outperforming their Asian peers.

Separately the latest report from the World Health Organization warned that early evidence points to COVID-19 vaccines being less effective against Omicron. The news added to the risk off feel hurting Indian assets and the Rupee.

The US Dollar is trading higher across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.10% at the time of writing at 96.47 after two straight days of gains.

The US Dollar is edging moved higher in the previous session after producer prices rose to a record high in November. Producer prices measure inflation at wholesale level and are often considered a lead indicator for consumer prices. Therefore, the data suggests that consumer prices could still rise higher.

Today investors are focused on the Federal Reserve interest rate announcement due later. The Fed is not expected to raise interest rates. However, after starting to taper bond purchases last month, there is a good chance that the Fed will accelerate the pace at which they taper, in order to bring inflation under control. Inflation rose to an almost 40 year high in November of 6.8% well over the Fed’s 2% target level.

Ahead of the Fed’s rate decision US retail sales will be under the spotlight. Analysts are expecting sales to rise to 0.8% month on month in November, down from 1.7% in October.