USD/INR edges higher as traders brace for Indian WPI inflation data

• The Indian Rupee edges lower in Monday’s Asian session. 
• The preliminary reading of the HSBC Indian PMI improved in December. 
• Elevated USD bids, weaker in Asian peers and a dovish tilt in RBI’s monetary policy could undermine the INR. 
• Traders will take cues from the Indian WPI inflation data, which is due later on Monday. 

The Indian Rupee (INR) weakens on Monday. Heightened US Dollar (USD) demand in the non-deliverable forwards market and a weaker Chinese Yuan weigh on the local currency. Furthermore,  the growing expectations of a dovish tilt in monetary policy following the appointment of a new Reserve Bank of India (RBI) governor could contribute to the INR’s downside.

The preliminary estimate released by HSBC showed on Monday that the India Manufacturing Purchasing Managers Index (PMI) improved to 57.4 in December from 56.5 in November. Meanwhile, the Services PMI rose to 60.8 in December versus 58.4 prior and the Composite PMI climbed to 60.7 during the same report period from 58.6 in November. The local currency remains weak in an immediate reaction to the upbeat PMI data.