USD/INR: Rupee pulls back from 11-week low ahead of RBI decision

India’s Rupee pulled back from recent 11-week low against the US Dollar and traded within a narrow range on Monday ahead of key US CPI inflation data and a rate decision by the Reserve Bank of India, both expected on Thursday.

Last Friday, the Rupee gained 0.29% as the US Dollar softened and US Treasury yields dropped, after data showed US economy had added fewer-than-expected jobs in July, 187,000. That figure was below the average monthly growth of 312,000 over the previous 12 months.

Investor focus now sets on the US July consumer inflation data. Annual core CPI inflation is expected to slow to 4.7% from 4.8% in June. A reading in line with expectations or an even bigger CPI drop would add to prospects of a Federal Reserve pause.

Another key event on Rupee traders’ radar will be the Reserve Bank of India’s policy decision. The central bank is expected to keep its benchmark policy repo rate without change at 6.5% at its August meeting, as it aims to ensure inflation remains within its 2%-6% target range.

Still, some analysts expect a hawkish tone.

“Higher food and crude oil prices, along with uneven rains, warrant caution,” ANZ analysts wrote in an investor note, cited by Reuters.

“The RBI will likely respond with a more hawkish tone, but the bar for a rate hike is high.”

As of 7:01 GMT on Monday USD/INR was inching up 0.09% to trade at 82.7300. Last week, the exotic Forex pair went up as high as 82.8900. The latter has been the pair’s strongest level since May 19th (82.8950).