Indian rupee slips along with Asian FX as US inflation, Fed looms

MUMBAI: The Indian rupee weakened on Monday as Asian currencies fell at the beginning of a week crowded with high-profile events, including a US Federal Reserve meeting, with domestic inflation data awaited at home.

The rupee declined 0.32% to 82.5350 per dollar, bouncing back from a near-82.75 level during the session.

All Asian currencies eased as the dollar index gained initially, with stronger-than-expected US producer prices data affirming chances of interest rates staying elevated.

Released on Friday, the report caused jitters about price pressures persisting in the economy, which could temper the market narrative of the Fed hiking rates in smaller increments, although for a longer period.

Scheduled for release on Tuesday is the US retail inflation data.

Meanwhile, investors have largely priced in the 50 basis point (bps) rate hike expected from the Fed on Wednesday and now look to the dot plot and economic projections it will provide.

Indian rupee seen opening higher as oil falls further, Asian FX rise

“Fed members would be concerned about the impact of past rate hikes as monetary policy operates with long and variable lags. At the same time, they would highlight that the fight against inflation is not over,” said Abhishek Goenka, founder and CEO of forex advisory firm IFA Global.

“For the week, we expect the rupee to trade in a 81.90-82.90 range with bias towards appreciation.”

Market participants believe lower oil prices and a subdued dollar is supporting the rupee, even though it has been underperforming Asian counterparts since November. Losses exacerbated over the past fortnight due to dollar demand and repositioning-related outflows.

This has seen the rupee become the biggest laggard among major Asian currencies so far this year, reversing from an earlier period of outperformance.

Meanwhile, investors eyed India’s inflation data, due after market hours. The consumer price index data for November hitting a nine-month low of 6.4% is expected, but Barclays said any surprises there could prompt a repricing of terminal rate expectations.