USD/INR Price News: Rupee bears ignore firmer India inflation near 82.30 on hawkish Fed bets

USD/INR snaps three-day downtrend amid firmer yields, US dollar.
Five-month high India inflation fails to push RBI hawks.
US Dollar’s safe-haven demand, upbeat US fundamentals versus India favor pair buyers.
Any disappointment from US CPI will have limited repercussions on DXY’s broad fundamental strength.

USD/INR picks up bids to 82.32 while paring the first weekly loss in four ahead of Thursday’s European session. In doing so, the Indian rupee (INR) pair traces firmer US Treasury yields ahead of the US inflation numbers for September.

Other than the pre-data anxiety, hawkish Fed bets and the recent Federal Open Market Committee (FOMC) Meeting Minutes, as well as the US data, could also be linked to the USD/INR pair’s run-up.

The latest Fed Minutes mentioned that the policymakers are concerned about inflation and fear doing too little. With this, the CME’s FedWatch Tool prints a nearly 85% chance of the Fed’s 75 bps rate hike in November.

On the other hand, the US action to increase hardships for Chinese chipmakers also propels the pair prices.

On the contrary, Chinese media chatters suggesting the government’s plan to buy houses as a part of the stimulus seemed to have put an immediate floor under the riskier assets, which in turn negatively affect the US dollar. Additionally, the softer US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, also probe the greenback buyers.

At home, India’s retail inflation accelerated in September to a five-month high of 7.41% year-on-year as food prices surged, raising fears of further interest-rate hikes when the central bank meets for its next policy review in December, reported Reuters on Wednesday. With this, the odds of the Reserve Bank of India’s (RBI) 35 bps rate hike in December appear more lucrative. However, the volume of rate increase and the time distance portray a more hawkish scenario for the Fed than the RBI, which in turn favors the USD/INR bulls.

Moving on, USD/INR may portray a sideways to positive move ahead of the US CPI, expected to ease to 8.1% YoY versus 8.3% prior. However, the more important CPI ex Food & Energy is likely to increase to 6.5% YoY from 6.3% prior and can favor more upside considering the recession woes.