USD/INR refreshes all-time high ahead of US inflation data
- Indian Rupee slumps to near 88.60 against the US Dollar ahead of the US inflation data for August.
- Economists expect the US headline CPI to have grown at a faster pace of 2.9% on a year-over-year basis.
- The Fed appears certain to cut interest rates next week.
The Indian Rupee (INR) posts a fresh all-time low near 88.60 against the US Dollar (USD) on Thursday. The USD/INR pair soars as the Indian Rupee underperforms its peers despite easing trade tensions between the United States (US) and India.
On Tuesday, US President Donald Trump posted comments on Truth.Social signaled that trade discussions between both nations are going on, and they will reach a trade agreement soon. In response, India's Prime Minister Narendra Modi welcomed Trump's post by posting a tweet on X, stating that our trade negotiations will pave the way for "unlocking the limitless potential of the India-US partnership".
Trade relations between the US and India have been through a rough phase as President Donald Trump raised tariffs on India to 50%, the highest among Washington’s trading partners, for buying Oil from Russia. This week, US President Trump has also urged the European Union (EU) to impose 100% tariffs on China and India to pressure Russian leader Vladimir Putin to stop the war in Ukraine. Trump has often called the money coming from India and China to Russia through Oil purchases is funding Moscow's continuing war with Kyiv.
Improving trade relations between the US and India have also resulted in a slowdown in selling pressure by overseas investors in the Indian stock market. On Wednesday, Foreign Institutional Investors (FIIs) sold shares worth Rs. 115.69 crores, which was significantly lower than had been seen in the past few months.
On the domestic data front, investors await the India's CPI data for August, which is scheduled for August. The US retail inflation is expected to have grown at an annual pace of 2.1%, faster than 1.55% in July. Still, it would be lower than the Reserve Bank of India’s (RBI) target of 3.7% for the current financial year, which was lowered from 4% in its policy meeting in June. Fears of inflation undershooting the RBI’s target could lead the central bank to loosen its monetary policy further in the remainder of the year.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.24% | 0.44% | 0.16% | 0.24% | 0.45% | 0.07% | |
| EUR | -0.07% | 0.14% | 0.24% | 0.09% | 0.13% | 0.37% | -0.06% | |
| GBP | -0.24% | -0.14% | 0.10% | -0.08% | -0.08% | 0.19% | -0.20% | |
| JPY | -0.44% | -0.24% | -0.10% | -0.22% | -0.16% | 0.08% | -0.31% | |
| CAD | -0.16% | -0.09% | 0.08% | 0.22% | -0.05% | 0.32% | -0.10% | |
| AUD | -0.24% | -0.13% | 0.08% | 0.16% | 0.05% | 0.25% | -0.19% | |
| INR | -0.45% | -0.37% | -0.19% | -0.08% | -0.32% | -0.25% | -0.44% | |
| CHF | -0.07% | 0.06% | 0.20% | 0.31% | 0.10% | 0.19% | 0.44% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily digest market movers: The Fed is certain to cut interest rates next week
- The upside move in the USD/INR pair is also driven by some strength in the US Dollar. The US Dollar trades slightly higher ahead of the United States (US) Consumer Price Index (CPI) data for August, which will be published at 12:30 GMT.
- The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades near a three-day high around 98.00, at the time of writing.
- The impact of the US inflation data will be significant on the size of the interest rate cut, as the resumption of the monetary-easing campaign by the Federal Reserve (Fed) in its monetary policy meeting next week seems certain.
- According to the CME FedWatch tool, traders see an 8% chance that the Fed will cut interest rates by 50 basis points (bps) to 3.75%-4.00% on September 17, while the rest point a standard 25-bps interest rate reduction.
- Economists expect the US headline CPI to have grown at an annualized pace of 2.9%, faster than 2.7% in July. In the same period, the core CPI – which excludes volatile food and energy items – is estimated to have risen steadily by 3.1%. On a monthly basis, both the headline and the core CPI are expected to have grown by 0.3%.
- Earlier, market experts had been arguing that higher consumer inflation expectations in the wake of tariffs imposed by US President Donald Trump could be a drag on speculation of policy rate cuts. But, so far, the impact of Trump’s tariffs has not appeared to be persistent. The Producer Price Index (PPI) report for August, released on Wednesday, showed that prices of goods and services at the producer level surprisingly grew at a moderate pace. Also, a majority of Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, have signaled that the tariff-driven inflation seems to be a one-off and not stubborn in nature.
Technical Analysis: USD/INR surges to near 88.60
The USD/INR climbs to near 88.60 against the US Dollar on Thursday, the highest level in history. The near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 87.90.
The downside move in the 14-day Relative Strength Index (RSI) has found ground near 60.00. A fresh bullish momentum would emerge if the RSI holds above that level.
Looking down, the 20-day will act as key support for the major. On the upside, the round figure of 89.00 would be the key hurdle for the pair.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
