The Indian rupee opened weaker against the US dollar on Wednesday, pushing USD/INR up toward the 88.80 area ahead of India’s October Consumer Price Index release at 10:30 GMT.
Economists forecast October’s retail inflation at 0.48% year-on-year, down from September’s 1.54%, reflecting sustained declines in food prices. Bank of America analysts note that “base effects are particularly supportive this month, given the sharp jump in vegetable prices last October.”
Signs that price pressures are abating could fuel speculation that the Reserve Bank of India will cut rates again before year end. So far in 2023, the RBI has already trimmed its repo rate by 100 basis points to 5.5%.
Meanwhile, continued foreign capital outflows—driven in part by lingering uncertainty over a US-India trade agreement—are keeping the rupee under pressure. On Tuesday, Foreign Institutional Investors were net sellers, offloading ₹803.22 crore worth of Indian equities.
On the global front, the US dollar itself is trading with caution amid growing odds of a Federal Reserve rate cut in December. The CME FedWatch tool shows a 68% chance of a 25 bp reduction to a 3.50%–3.75% target, up from 62.4% on Monday.
At the time of writing, the US Dollar Index (DXY)—which measures the dollar against six major currencies—was slightly firmer near 99.55. The index had slipped sharply on Tuesday after ADP reported a four-week average of just 11,250 layoffs per week through late October, underscoring a cooling US labor market. “The labor market struggled to produce jobs consistently during the second half of the month,” commented Nela Richardson, ADP’s chief economist.
This weaker jobs data has weighed on Fed rate projections, as officials have flagged downside risks to employment. Looking ahead, investors will turn their attention to the slate of US economic releases that were delayed by the government shutdown. On Tuesday, the US Senate passed a federal funding bill to the Republican-controlled House, where it’s expected to be approved on Wednesday.
USD/INR Holds Firm Above the 20-Day EMA
At Wednesday’s open, USD/INR climbed toward 88.80, maintaining its near-term upside bias as it holds above the 20-day EMA—currently around 88.65. The 14-day RSI is striving to break back above 60; a successful move past that level would signal renewed bullish momentum. On the downside, the August 21 low of 87.07 serves as key support, while the pair faces its next major hurdle at the all-time high of 89.12.
