MUMBAI: The Indian rupee weakened on Tuesday, despite gains in most other Asian peers, as dollar demand from importers, including local oil companies, eroded the impact of positive global cues.
The rupee ended at 83.1925 against the U.S. dollar, down 0.06% compared with its close at 83.14 on Friday. Indian financial markets were closed on Monday for Christmas.
Asian currencies were mostly higher with the Korean won leading gains up by 0.65%. The 10-year U.S. Treasury yield edged lower in Asia to 3.88%.
But the rupee was unable to gain because of strong dollar demand from oil companies, a foreign exchange trader at a state-run bank said.
“This week will be quiet (for the rupee) as there is nothing much to speculate or look forward to,” the trader added, referring to muted market activity in the year’s final week.
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The dollar index was steady at 101.72 in Asia hours after dropping to its weakest level in nearly 5 months on Friday after data showed U.S. personal consumption expenditure (PCE) inflation rose less than expected in November.
The core PCE price index advanced 3.2% year-on-year in November, the smallest rise since April 2021. Easing inflation is likely to support expectations the Federal Reserve could soon starting lowering policy rates.
Investors are currently pricing in a high probability of a rate cut in March and are expecting a total of 150 basis points of rate reductions in 2024, according to CME Group’s FedWatch tool.
The absence of any major economic data releases and muted global markets means the rupee will likely be guided by domestic cues, Amit Pabari, managing director at FX advisory firm CR Forex said.
India’s central bank will publish the current account deficit and balance of payments data for July-September later this week.
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