MUMBAI: The Indian rupee declined on Wednesday, pressured by the weakness on Asian peers and the exit of short positions on the US dollar.
The rupee was at 83.1725 to the dollar at 10:22 a.m. IST, down from 83.1150 in the previous session.
The rupee has not had a losing day since last Tuesday.
Asian currencies were down between 0.1% and 0.4% and the dollar index inched up to 102.54.
“While it would look like momentum is favourable (for the rupee), you have to take into account how dips (on USD/INR) to 83 have been jumped on,” a FX trader at a private bank said.
USD/INR managed to recover from the dip to near 83.05 on Monday and on Tuesday.
“This probably changes the risk-reward on short (USD/INR) positions, more so when the US inflation numbers are due,” the trader added.
US consumer inflation data is due on Thursday and economists polled by Reuters expect core CPI to rise 0.3% month-on-month in December.
Indian rupee inches up tracking Asian peers, forward premiums rise
On a on-year basis, core CPI is expected to rise by 3.8%, slower than the 4% pace in November.
A report that is in line with expectations would mean more progress towards the Federal Reserve’s 2% inflation target, making investors more confident that a series of rate cuts are on the way this year.
Investors see a high probability of rate cuts kicking off at the March meeting.
A few economists reckon that may be too optimistic. Thursday’s data will indicate how well-placed the current interest rate futures expectations are, which holds implications for the dollar.
“Interest rate futures and swaps are often the first derivative and the likes of the dollar follow in sympathy,” Chris Weston, head research at Pepperstone, said in a note.
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