US Dollar to Indian Rupee (USD/INR) Exchange Rate Stronger after India’s CPI Figures
On Monday the US Dollar to Indian Rupee (USD/INR) exchange rate climbed by 0.3% in response to reports that companies were buying up US Dollars.
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The pairing held its advance as Indian economic figures showed that the pace of wholesale price inflation (WPI) slowed by more than expected in June.
The annual WPI figure came in at a four-month low of 5.43% last month and lessened the likelihood of the Reserve Bank of India pursuing a policy of higher borrowing costs.
Before the close of local trading the Rupee held declines against the US Dollar as domestic Consumer Price Inflation (CPI) data also eased some of the high-interest-rate pressure on the RBI.
The US Dollar to Rupee exchange rate moved from highs of 60.2450 to lows of 60.0000.
The latest figures showed that India’s Consumer Prices climbed by 7.31% in June year-on-year.
This was down from an annual increase of 8.28 in May and was the slowest rate of inflation recorded using the current measure employed by the Statistics Ministry.
Economists had anticipated inflation of 7.7%.
Last week RBI Governor Raghuram Rajan asserted that India is likely to record inflation of below 8% in 2014, and this latest report supports that supposition. However, the central bank may wait a few months before easing fiscal policy.
In the view of economist Rupa Rege-Nitsure; ‘Both headline numbers [CPI and WPI] have surpassed expectations, but the Reserve Bank of India has said they are focused on sequential momentum before taking any action on monetary policy. The RBI will undertake an assessment of the monsoon in September, but even then I don’t expect any decisions on interest rates this calendar year.’
The US Dollar to Rupee (USD/INR) exchange rate was also trending in a stronger position as the ‘Greenback’ broadly advanced ahead of today’s US Advance Retail Sales figures and Federal Reserve Chairwoman Janet Yellen’s testimony to the Senate Committee.
The US Sales report is expected to detail a monthly advance of 0.6%, double the 0.3% month-on-month increase recorded in May.
Meanwhile, the recent upbeat US employment and inflation reports might prove to be enough of a motivation for Fed Chairwoman Janet Yellen to adopt a less dovish tone.
Over the last few months Yellen has gone out of her way to make it clear that interest rates will remain on hold until long after the US quantitative easing programme has been completely tapered later this year.
However, as highlighted by strategist Desmond Chua, ‘If Yellen indicates that she sees inflation expectations heating up, we might see prospects of a rate hike coming sooner than previously thought.’
A surprising outcome could cause movement in the US Dollar to Rupee (USD/INR) pairing.
The Pound to Rupee (GBP/INR) exchange rate was also able to jump by 0.5% as Sterling broadly strengthened in response to the UK’s unexpectedly impressive inflation data for June.
With additional economic reports for India limited over the next few days, Rupee fluctuations will most likely be driven by global developments.
The British Pound is currently trading against the Rupee in the region of 103.1310.
The US Dollar is currently trading against the Rupee in the region of 60.1750.