MUMBAI: The Indian rupee rose on Wednesday tracking strength in most Asian currencies after a lower-than-expected U.S. inflation print cemented hopes the Federal Reserve will begin to cut interest rates from September.
The rupee was at 83.9025 against the U.S. dollar as of 10:50 a.m. IST, up nearly 0.1% from its close at 83.97 in the previous session.
The rupee has been lingering close to record lows over the last fortnight, and its gains are expected to be limited.
Importers have been quite actively bidding for dollars and there is an absence of large inflows, leading to only muted gains for the rupee, a foreign exchange trader at a private bank said.
The dollar index was at 102.64 after dropping nearly 0.5% on Tuesday after data showed that U.S. producer prices rose less than expected in July.
Asian currencies were mostly higher by 0.1% to 0.9%.
U.S. bond yields fell, with the 10-year declining to 3.84%, down 6 basis points from its close on Monday.
Indian rupee sees mild relief amid uptick in Asia peers
The rupee “is likely to underperform amid dollar weakness. We expect it to trade in an 83.80-83.95 range with sideways price action”, FX advisory firm IFA global said in a note.
The weak U.S. wholesale inflation print prompted investors to raise wagers on deeper rate cuts.
Investors are now pricing in 107 basis points of Fed rate cuts this, about 9 bps higher than before the U.S. inflation data.
The U.S. consumer inflation print will be in focus later in the day. A weaker-than-expected reading may further bolster hopes of aggressive rate cuts.
Dollar-rupee forward premiums rose, with the 1-year implied yield up 5 basis points at 2.09%, its highest since May 2023.
