Rupee posts gains as inflation cools; ends 16 paise higher at 85.82/$

Indian Rupee today: The domestic currency closed 16 paise higher at 85.82 against the dollar on Tuesday, according to Bloomberg

The Indian Rupee strengthened sharply on Tuesday, ending a two-day losing streak, after softer retail and wholesale inflation data raised hopes of a possible interest rate cut by the central bank. A fall in the dollar index and crude oil prices also helped the currency.  

 

The domestic currency closed 16 paise higher at 85.82 against the dollar on Tuesday, according to Bloomberg. The rupee has depreciated by 0.40 per cent against the greenback in the current financial year, and has witnessed 0.24 per cent depreciation in the current calendar year.

 

Rupee traded positively as dollar index volatility and weak crude prices provided supportive cues, according to Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities. "A strong rally in the capital markets further bolstered rupee sentiment. The rupee is expected to trade in a range of 85.55 to 86.25 in the near term." 

 

India’s retail inflation moderated further in June to 2.1 per cent from 2.82 per cent in May, offering room for the central bank’s monetary policy committee to maintain the status quo in its upcoming reviews. The last time the Consumer Price Index (CPI) reported this mild uptick was in January 2019 -- at 1.97 per cent. The decline in food prices was mainly driven by a drop in vegetable prices and a decline in pulses. 

 

The CPI inflation came in lower, indicating a deflationary trend and offering the RBI room to consider a rate cut, although it signalled a pause in the last policy meeting, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. 

 

Separately, the Wholesale Price Index (WPI)-based factory gate inflation turned negative in June for the first time in 20 months, at -0.13 per cent as against 0.39 per cent in May.  

 

Meanwhile, the India-US trade deal remains under wraps, with talks ongoing in Washington, Bhansali said, adding that the markets await further updates on the outcome. A fresh tariff threat by US President Donald Trump against Russia kept investors wary. Trump threatened 100 per cent tariffs on Russia if Vladimir Putin doesn't agree to a peace deal with Ukraine by early September. 

 

The dollar index, a measure of the greenback against a basket of six major currencies, was down 0.11 per cent at 97.97.

 

Crude oil prices remained volatile as the market digested Trump's 50-day deadline for Russia, while trade tensions with other countries linger. Brent crude price was down 0.13 per cent at $69.12 per barrel, while WTI crude prices were lower by 0.25 per cent at 66.81, as of 3:30 PM IST.