• Indian Rupee trades soft as the higher-than-expected US inflation data boosts the US Dollar. 
• The hawkish stance of the Reserve Bank of India (RBI) might cap the INR’s downside for the time being. 
• India’s Wholesale Price Index (WPI) Food, Fuel, and Inflation for January will be in the spotlight on Wednesday. 

Indian Rupee (INR) loses traction on Wednesday amid the firmer US Dollar (USD). The uptick of the pair is supported by stronger-than-expected US inflation data, which prompts investors to further push back expectations on when the Federal Reserve (Fed) will cut its interest rate. 

Meanwhile, the Reserve Bank of India (RBI) stated that it desires to see inflation return to 4%, the midpoint of the 2-6% target. The markets anticipate the Indian central bank to maintain a hawkish stance in the near term and not cut rates ahead of the Fed. This, in turn, could provide some support to the INR and act as a headwind for the USD/INR pair. 

Investors await India’s Wholesale Price Index (WPI) Food, Fuel, and Inflation for January, due on Wednesday. The markets expect to see a cooling down of WPI inflation from 0.73% in December to 0.53% YoY in January. On the US docket,  Fed’s Goolsbee and Barr are set to speak about the inflation and interest rate outlook. The Retail Sales and Producer Price Index (PPI) for January will be released later this week on Thursday and Friday, respectively