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Indian rupee on Thursday opened higher against the US dollar tracking gains in its Asian peers on optimism over a slower pace of US rate hikes. Traders are now cautious ahead of consumer price inflation data on Friday.
The home currency opened at 79.24 a dollar and touched a high and a low of 79.24 and 79.26 respectively. At 9.10am, the currency was trading at 79.26 a dollar, up 0.34% from its previous close.
Overnight, the data on US consumer inflation slowed to 8.5% in July from 9.1% in June. The slower US inflation was driven by deflation in some Pandemic related sectors — used cars, airline fares, and lodging, while shelter inflation held firm. Headline inflation was flat on the month (8.5% YoY), and core inflation more than halved (0.31%) from the monthly run-rate in June and was unchanged at 5.9% YoY.
” The path to disinflation is now more about how quickly it decelerates and how the pace shapes the Fed’s policies in the next 6-12 months. While the Fed may become more sensitive to growth risks, one has to expect (rather wish) a swift decline in core PCE and core CPI (to something with a sub 3%-handle this year) to think the Fed would avoid further growth sacrifice. On the net, we believe that such a decline will take longer”, said Madhavi Arora lead economist of Emkay Global.
Arora see the Fed hiking another 100bps this year (50bps in Sep and 25bps each in the following two meetings) before putting a break by year-end.
India consumer price inflation will be out on 12 August after 5.30pm. India’s retail inflation rate likely slowed in July, thanks to lower food prices. According to a Moneycontrol poll of 18 economists, inflation may have dropped to 6.7 percent last month. In June, the inflation rate measured by the Consumer Price Index (CPI) decelerated to 7.01 percent from 7.04 percent in May.
Among Asian currencies South Korean won was up 0.67%, Indonesian rupiah gained 0.4%, Philippines peso rose 0.32%, Taiwan dollar 0.23%, Malaysian ringgit 0.18%, Thai Baht 0.1%.
Meanwhile, the dollar index climbed after Chicago Fed President Charles Evans said price pressures remain “unacceptably high” after a softer US inflation, Bloomberg reported.
” Though it’s an improvement, it’s not sufficient to stop the Federal Reserve from ploughing ahead with more aggressive tightening of monetary policy to check inflation. Street appreciated the improvement, though quantum is small but directional decline provided big relief to investors. Moreover, it also lowers the probability of recession ahead. We expect inflation to cool off gradually on the back of falling crude prices and softening other commodities going ahead. This would support global economies and global equity markets ahead”, said Mitul Shah – Head of Research at Reliance Securities .
(Bloomberg contributed this story)
