By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee inched higher on Tuesday, while forward premiums slipped, with traders focusing more on upcoming U.S. inflation reading than on India’s data, given the uncertainty over the Federal Reserve’s policy path.
The rupee was quoting at 87.6425 at 11.22 am IST, up slightly from 87.66 on Monday. The currency had opened a tad weaker at 87.7050. The implied yield on the one-year dollar/rupee forward premium was down 2 basis points at 2.06%.
The July India consumer price index (CPI) data due Tuesday is expected to show inflation at its slowest pace in eight years, at 1.76%. Traders said the number will have little impact on either spot or forwards since the soft print is already priced in.
“Positioning in forwards is fairly light, and the direction will largely hinge on what happens with U.S. rates,” said a currency forwards trader at a bank.
The U.S. July data, due after the release of India’s report, is expected to show that core inflation rose at the pace of 0.3%.
The numbers come after a weaker-than-expected U.S. jobs report, which has bolstered bets that the Federal Reserve will cut rates next month and at least once more in the last quarter of 2025. Investors have priced in a 90% chance of a rate cut in September.
ING Bank is forecasting a 0.4% core print, which it said would place higher emphasis on subsequent data “and may limit further dovish repricing in the near term, though should not materially reverse September cut bets.”
U.S. President Donald Trump’s tariffs have added uncertainty to the inflation outlook, complicating the Fed’s policy path.
While recent data suggests the labour market is cooling, the pass-through from higher import costs could keep price pressures elevated, forcing policymakers to weigh the risks of cutting rates too quickly.
(Reporting by Nimesh Vora; Editing by Anil D’Silva)
