The USDINR pair made a gap up opening at 74.58 levels and traded in the range of 74.53-74.65 with an upside bias. The pair finally closed the day flat at 74.58 levels. The rupee was trading weaker against the dollar today as the greenback gained globally after US inflation rose to 5.4% in June, the most since August 2008, compared with 5.0% in May. The unexpected rise in CPI in the US boosted prospects of an earlier-than-expected normalization of monetary policy by the US Federal Reserve. This dampened sentiment for emerging-market currencies, including the rupee.
The rupee was in thin trade also because traders waited for the testimony of US Federal Reserve Chair Jerome Powell to Congress later in the day for further cues on policymakers' views about any tapering of the monetary stimulus and potential rate hikes. British inflation surged further above the Bank of England's target in June to strike 2.5%, its highest since August 2018, increasing speculation that the BoE will have to consider sooner whether to ease off its huge stimulus programme.
The domestic wholesale price-based inflation eased marginally to 12.07% in June as crude oil and food items witnessed some softening in prices. However, WPI inflation remained double-digit for the third consecutive month in June, mainly due to a low base of last year. On an annualized basis, a premium on the one-year, exact-period dollar/rupee contract was at 4.48%, against 4.47% Tuesday. The RBI set the reference rate for USDINR at 74.57 levels.
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