• Indian Rupee (INR) falls, tracing equities lower
  • Indian trade deficit widens
  • US Dollar (USD) rallies hard after strong retail sales data.
  • Fed could raise rates sooner

The US Dollar Indian Rupee (USD/INR) exchange rate is heading higher on Tuesday, extending gains from the previous session. The pair settled +0.04% higher on Monday at 74.37. At 16:00 UTC, USD/INR trades +0.15% at 74.48.

The Rupee is moving lower on Tuesday for a third straight session, tracing domestic equities lower.

On the data front, the Indian trade deficit more than doubled in October compared to the same month a year earlier, as imports increased at a much faster pace than exports.

According to government data the trade deficit came in at $19.73 billion against $9.15 billion deficit the same month a year earlier. Exports rose 43.1% to $35.65 billion, whilst imports rose 62.5% to $55.37 billion. Non-oil imports rose by a lesser 45.9%.

The US Dollar is trading higher versus the Rupee but is holding steady versus major peers. The US Dollar Index, which measures the greenback versus a basket of major currencies trades -0.01% at the time of writing at 95.11 after gaining 0.86% across the previous week taking it to a 16-month high.

The US Dollar is charging higher following impressively strong retail sales data. The value of retail sales rose 1.7% in October compared to the previous month. This was well ahead of the 1.4% forecast and marked a firm increase from the upwardly revised 0.8% from September.

The strong sales data came even though prices are rising at the fastest pace in 30 years and despite consumer sentiment slumping to a 10-year low. Whilst part of the rise is owing to higher petrol prices, early holiday shopping is also playing a part. The strong number suggests that the US economic recovery is on track. The data prompted expectations of a sooner move by the Fed to tighten monetary policy.