Potential Gain for USD/INR Before US PPI and Fed Rate Announcement

• The Indian Rupee is losing traction due to the modest demand for US Dollars (USD).
• In November, the Indian Consumer Price Index (CPI) surged 5.55% YoY, up from 4.87% in October, and Food Inflation climbed to 8.70% from 6.61% the previous month.
• Market players are closely monitoring the Fed interest rate decision and the press conference.

The Indian Rupee (INR) is extending its downward trend due to modest US Dollar (USD) strength. Recent data revealed that the Indian Consumer Price Index (CPI) has exceeded the Reserve Bank of India (RBI) target of 4.0%. Furthermore, the Consumer Food Price Index, a measure of food inflation, has increased significantly. The RBI Monetary Policy Committee has kept a close eye on these developments and is making efforts to keep inflation in check.

Investors are eagerly awaiting the US Producer Price Index (PPI) ahead of the Federal Reserve (Fed) monetary policy meeting. Additionally, the Indian economy continues to show signs of growth, making it an appealing prospect for foreign investors. However, the markets remain cautious as they anticipate the Fed’s decision on the benchmark overnight borrowing rate at its December meeting.

Daily Digest Market Movers: Indian Rupee trades weaker amid higher inflation concern

• India’s Consumer Price Index (CPI) surged 5.55% YoY in November from 4.87% in October, according to the Ministry of Statistics & Programme Implementation.
• Indian Industrial Production for October reached a 16-month peak, rising by 11.7% compared to a 4.1% increase in the previous reading.
• Indian Manufacturing Output for October came in at 10.4% MoM versus 4.9% prior.
• The International Monetary Fund (IMF) stated that India’s economy will be one of the fastest-growing in the world over the next few years, estimating Real Gross Domestic Product (real GDP) to expand by more than 6.0% in both 2023 and 2024.
• According to the National Securities Depository, foreign investors allotted  $3.7 billion in Indian equities and $800 million in debt over the six sessions in December.
• US inflation, as measured by the Consumer Price Index (CPI), climbed 0.1% MoM in November from 0% in October, while the annual CPI eased from 3.2% to 3.1% in November.
• The Core CPI, which excludes volatile food and energy prices, rose to 0.3% MoM from 0.1% in the previous month. On an annual basis, the Core CPI figure grew 4.0% YoY, matching expectations.
• The markets anticipate the Fed to maintain the benchmark overnight borrowing rate in a range between 5.25% and 5.50% at its December meeting.

Technical Analysis: Indian Rupee’s constructive outlook remains unchanged

Indian Rupee trades softer on the day.

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