USD/INR: Rupee extends gains ahead of CPI data but upside seen limited

Key points

India’s Rupee extended gains from early this week against the US Dollar ahead of US and India CPI inflation figures, but upside was seen as limited.

The Rupee has reached a resistance area of 82.20-82.30 per dollar, which some analysts believe may be difficult to overcome, as short-term speculators are likely to take action.

On the data front, both headline and core US CPI are expected to have increased 0.3% month-over-month in June, according to estimates.

“If the consensus is correct about headline and core inflation rising by 0.3% month-on-month, the Fed will not be convinced that inflation can return to its 2% target this year,” DBS Research wrote in an investor note, cited by Reuters.

Meanwhile, annual headline CPI inflation is expected to have slowed to 3.1% in June, while annual core CPI inflation – to have slowed to 5%.

The US Dollar Index registered a fresh two-month low of 101.34 on Wednesday ahead of the data. The US currency extended the losses from the start of the week after Federal Reserve officials indicated that the central bank was approaching the end of its policy tightening cycle.

As for India’s CPI inflation report due out just minutes before the US data, market consensus points to a 4.58% year-on-year surge in June, following a 4.25% YoY increase in May.

As of 9:50 GMT on Wednesday USD/INR was edging down 0.11% to trade at 82.2800. Earlier in the session, the exotic Forex pair went down as low as 82.2260. The latter has been the pair’s weakest level since July 5th (81.9260).