The Indian rupee came under pressure against the U.S. dollar on Wednesday, lifting USD/INR toward the 88.80 area as traders awaited India’s October Consumer Price Index release at 10:30 GMT.
Economists forecast October’s retail inflation at just 0.48% year-on-year, down sharply from September’s 1.54%, thanks primarily to sustained falls in food prices. Bank of America notes “base effects are especially supportive this month, mirroring last October’s spike in vegetable costs.”
Signs that inflation is cooling have intensified expectations of further Reserve Bank of India easing before year-end. To date, the RBI has already lowered its repo rate by 100 basis points to 5.50%.
Meanwhile, foreign investors remain net sellers amid continued uncertainty over a U.S.–India trade deal. On Tuesday, Foreign Institutional Investors off-loaded ₹803.22 crore worth of Indian equities, adding to the rupee’s weakness.
Globally, the U.S. dollar is trading cautiously but retains the upper hand as markets price in a roughly 68% chance of a 25 bp Fed rate cut to 3.50%–3.75% in December (up from 62.4% on Monday), according to the CME FedWatch tool. The U.S. Dollar Index (DXY) sits near 99.55, not far above Tuesday’s weekly low of 99.30, which followed softer-than-expected ADP data showing U.S. employers shed an average of 11,250 jobs per week through late October. “The labor market struggled to produce jobs consistently during the second half of the month,” said ADP chief economist Nela Richardson.
That dovish bias has weighed on the dollar’s performance of late, and traders will next turn their attention to a slate of U.S. economic releases that were delayed by the government shutdown. On Tuesday, the Senate passed a stopgap funding bill and sent it to the House for a Wednesday vote—an outcome that, if approved and signed, would reopen government offices and clear the way for new data to hit the tape.
Technical Analysis: USD/INR Holds Above Its Key 20-Day EMA
Early Wednesday, USD/INR climbed toward 88.80, keeping its short-term uptrend intact by staying above the 20-day EMA around 88.65. The 14-day RSI is aiming to retake the 60 level—if it succeeds, fresh bullish momentum could follow. On the downside, the August 21 low at 87.07 offers key support, while the all-time high of 89.12 stands as the next major resistance.
