Indian Inflation Breaches RBI Tolerance Band Ceiling, USD/INR 1-Month NDF Unfazed

USD/INR 1-month NDF has shown a limited reaction to the release of Indian CPI figures, with headline inflation breaching the upper end of the RBI's +2%-6% Y/Y tolerance band for the first time in four months. The NDF last trade +0.18 at INR82.84 with the spot market already shut.

• Spot USD/INR closed at INR82.73 today. The pair traded sideways through most of the session after gapping higher at the re-open. The multi-week high printed on Feb 7 at INR82.80 remained intact for now.
• India's CPI inflation for January printed at +6.52% Y/Y, exceeding the +6.00% median estimate. The outturn was outside of the +5.40% to +6.46% forecast range in the Bloomberg poll, suggesting that the market was taken by surprise.
• The RBI last week slowed the pace of its interest-rate hikes to 25bp but delivered a hawkish statement, reaffirming its inflation-fighting credentials and leaving the door open to further rate hikes if needed.
• Local FX markets continue to operate until 3:30pm local time, while bond markets have reverted back to pre-pandemic closing time of 5pm effective today.