• USD/INR hovers around 82.90 amid the renewed USD demand.
• Indian Consumer Price Index (CPI) for August came in at 6.83% YoY vs. 7.44% prior, below the expectation.
• The upside in the US Dollar (USD) is bolstered by the longer interest rate narrative in the US.
• Market players await the US CPI data due later in the American session on Wednesday.

USD/INR snaps four-day losing streaks after bouncing off the weekly low of 82.80 during the Asian session on Wednesday. The pair currently trades around 82.90, gaining 0.09% on the day. The market turns cautious ahead of the US Consumer Price Index (CPI) for August. The US CPI figure is expected to rise by 0.5%, while the core monthly figure is expected to remain at 0.2%.

Data released from the National Statistical Office (NSO) on Tuesday revealed that the Indian Consumer Price Index (CPI) for August came in at 6.83% YoY from 7.44% in July, below the market expectation of 7.0%. The August inflation gauge is lower than the 15-month high of 7.44% reported in July. However, inflation has risen over the upper bound of the Reserve Bank of India's (RBI) tolerance level of 2-6% for the second month in a row. Additionally, Indian Industrial Production for July surged 5.7% YoY from 3.7% in the previous reading, beating the market estimation of 5.0%

The RBI is anticipated to keep its monetary policy unchanged until inflation shows signs of consistently nearing 4%, but will consider further tightening measures if inflation remains over 7%.

On the other hand, the US Dollar (USD) may benefit from the higher for longer interest rate narrative in the US. According to the CME Fedwatch Tool, traders expect the Federal Reserve (Fed) to keep the interest rate unchanged in September at 5.25%-5.50%, with a 93% chance. Meanwhile, the market has priced in 40.8% of the odds of a rate hike in the November meeting. This, in turn, might boost the Greenback against the Indian Rupee (INR) and act as a tailwind for the USD/INR pair.

Looking ahead, market players will closely watch the US Consumer Price Index (CPI) data on Wednesday. Later this week, the US Retail Sales and Producer Price Index (PPI) will be released on Thursday while Indian Exports and Imports data will be due on Friday. These figures could give a clear direction to the USD/INR pair.