USD/INR in focus as India CPI jumps to 4.82% in August, RBI hike bets build

The Indian rupee faces a shifting policy backdrop after August retail inflation accelerated to 4.82% year-on-year, up from 4.45% in July and moving further above the Reserve Bank of India's 4% medium-term target. Food prices led the upside, with the Consumer Food Price Index rising 5.95% y/y, while rural inflation printed at 5.23% versus 4.31% for urban households. Despite the acceleration, headline CPI remains inside the RBI's 2%-6% tolerance band, giving the Monetary Policy Committee scope to hold before acting. The data reinforces market expectations that the RBI will lean hawkish, a factor that is typically supportive for the rupee and caps upside in USD/INR, though the pair remains heavily influenced by dollar direction and RBI intervention around record-high zones. Traders should watch the sequential trend in food prices, as a repeat acceleration in September would harden rate-hike pricing. A firmer RBI stance narrows the carry differential in favour of INR, while any downside inflation surprise would reopen upside room for USD/INR.