USD/INR rebounds from the 82.20 mark, as the INR seems to be on its own

• The Indian Rupee failed to show strength on the softish US CPI release.
• The US macro framework is diluting aggressive Fed rate hiking.
• RBI looks to remain hawkish despite easing inflation.  

USD/INR is not trading in line with its counterparts. The pair is not catching up with the US Dollar weakness. Falling US Treasury bond yields have led the US Dollar to lower. Despite that, the Indian Rupee failed to capitalize.

The United States Consumer Price Index (CPI) released on Tuesday had put the US Dollar on the sideline, as the inflationary matrix comes in line with expectations. The headlines MoM reading came in at 0.4% as expected, from the prior 0.5%, and YoY came in at 6.0% as expected, from the prior 6.4%. The core matrix MoM came in at 0.5% slightly higher than the 0.4% expected, and YoY came in at 5.5% in line with expectation.

The ex-shelter component signaled a slowdown, which is a beneficiary for the Federal Reserve (Fed). Starting this week, the Silicon Valley Bank’s (SVB) fallout has thrown a fresh wave of pessimism among investors, as the US banking regulators intervene to tackle the situation through a backstop as a rescue plan. But this situation has prompted a pessimistic mindset among investors for possible contagion risks.

Moving on to the US macro release, the calendar is due for US Retails Sales and Producer Price Index (PPI) on Wednesday, as well as the Empire State Manufacturing Index. It will be important to watch the Control Group from US retail sales as an impetus prior to the March FOMC meeting.

On the other hand, India’s Consumer Price Index (CPI) for February rose 6.44% YoY versus 6.35% expected and 6.52% prior. The aforementioned data will provide the Reserve Bank of India (RBI) to tick down on the hawkish bias, even though the market is still expecting a 25 basis point hike (bps) hike from the RBI. Despite of positive growth outlook and RBI’s hawkish stance, the Indian Rupee has failed to show strength.  

Levels to watch