Rupee Leans on RBI Policy, US Inflation for Volatility Rise

MUMBAI, Aug 10 (Reuters) – The Indian rupee was little changed on Thursday ahead of the Reserve Bank of India’s monetary policy decision, which will be followed by vital US inflation data.

The rupee, similar to how it has been for the last two days, was in a tight range. The coin was almost unchanged from 82.8150 on Wednesday and the 10-day realized volatility is now back below 3%. It has been in a 14 paisa range for this week.

“I was just expecting a tradable move on either side, although honestly speaking, the room for surprises in both RBI and US inflation is quite low,” said a currency trader at a bank.

The RBI is not expected to take any action on rates at 10:00am IST, although the decision is now seen as a minor formality in the wake of a jump in food prices.

A rate hike would boost the rupee and “you can expect a reaction of 10 to 15 paisas” if the RBI offers a surprise rate hike, the currency trader said.

Later, US inflation data is expected to show core prices rose 0.2% on-month in July and 4.8% on-year, according to a survey by Reuters. The annual headline inflation rate is pegged at 3.3%, up from 3% in June.

“We are likely to see something we haven’t seen for some time, namely an increase in annual inflation. The good news is that this is mainly due to base effects,” ING Bank said in a note.

Reporting by Nimesh Vora; Edited by Sonia Cheema

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