New Delhi (TIP)- The Indian rupee on July 15 weakened to 79.96 levels against US dollar. So far this year, the US dollar is up 7% against the Indian currency. The US dollar today was near 20-year highs against a basket of other major currencies. Oil prices rose today amid prospects of a less aggressive U.S. rate hike, although gains were capped by demand recovery worries.

The major drag for the rupee continues to be the FII selling which has exceeded $30 billion so far this year though the selling has eased in recent days.

Analysts sat that the red-hot inflation data in the US has raised the case for a full percentage point rate hike at the Fed’s meeting later this month, given the Fed chair’s stance that inflation must be brought down as quickly as possible. Data released on Wednesday showed US annual consumer prices jumped by a scorching 9.1% in June, the highest in four decades, topping expectations of an 8.8% rise. The Fed has already raised rates three times this year.

“The aggressive policy course by the US Fed to curb rising price pressures is exacerbating fears of a weakening growth outlook and leading to risk aversion in the markets. Besides, we have seen a relentless rise in the dollar index, while the euro has been hit hard as it tumbled below parity against the dollar for the first time in almost 20 years. Europe is grappling with an energy supply crunch owing to sanctions on Russia that make it more susceptible to recession risks,” said Sugandha Sachdeva, Vice President – Commodity and Currency Research, Religare Broking Ltd.

“This has led to a big moment depicting strength in the greenback as markets are expecting the US Fed to raise rates way more swiftly than its peers. Going forward, it remains to be seen whether the euro can hold around the psychological parity level and regain some lost ground. All eyes would now be on the ECB meeting lined up next week and that will provide further cues about the rupee-dollar exchange rate. Considering the macroeconomic backdrop, the Indian rupee has its eyes set on the 81 to the dollar mark in the near term,” she said.

Wholesale inflation eases to 3-month low of 15.18% in June

The wholesale price-based inflation eased to a three-month low of 15.18% in June on a sharp decline in the prices of minerals, but food articles continued to remain costly.

June is the 15th consecutive month when the Wholesale Price Index (WPI) based inflation remained in double-digit. Last month, it touched a record high of 15.88%. In June 2021, it was 12.07%.

Inflation in food articles in June was 14.39%, as prices of vegetables, fruits and potato witnessed a sharp spike over the year-ago period. In May, the wholesale price inflation in food articles was 12.34%. The rate of price rise in vegetables was 56.75%, while in potato and fruits, it was 39.38 and 20.33%, respectively. The WPI inflation in minerals dropped sharply to 8.55% in June from 33.94% in May. In the fuel and power basket, inflation was 40.38%, while in manufactured products and oil seeds, it was 9.19% and 2.74%, respectively. Inflation in crude petroleum and natural gas was 77.29% in June. Icra chief economist Aditi Nayar said minerals and basic metals displayed a sharp month-on-month correction in June 2022, as fears of an impending global recession unfolded, dampening commodity prices. “We expect the WPI inflation to ease to 13% in July 2022, reflecting the ongoing correction in global commodity and fuel prices as well as domestic food prices,” Nayar said.

She said the RBI could hike interest rates by 60 bps over the next two reviews, taking the repo rate to 5.5% by September 2022, followed by a pause to ascertain the momentum of economic growth.

She said the RBI could hike interest rates by 60 bps over the next two reviews, taking the repo rate to 5.5% by September 2022, followed by a pause to ascertain the momentum of economic growth.

         Source: Livemint and PTI