The rupee closed at 84.4525 against the U.S. dollar, down by 0.1% from its previous close at 84.3275. The currency declined to a low to 84.4750 during the session but avoided deeper losses on likely dollar-selling intervention by the Reserve Bank of India.
Softness in the dollar index in the latter half of the session helped the rupee claw back some losses as demand related to the futures expiry also faded. Asian currencies took a breather, led by the Thai baht, after declining in the previous session in light of U.S. President-elect Donald Trump’s pledge of higher tariffs on China, Canada and Mexico.
U.S. personal consumption expenditure (PCE) inflation data will be in focus later in the day for cues on the future path of the Federal Reserve’s policy rates.
Month-on-month core PCE inflation is expected to have held steady at 0.3% in October, according to economists polled by Reuters.
“Even though the market has largely moved on from the U.S. inflation story, a sticky reading will add to doubts that the Fed needs to cut in December after all,” ING Bank said in a note. The odds of a 25-basis point rate reduction at the Fed’s December meeting at currently at 66%, up from 52% day earlier, according to CME’s FedWatch tool. Meanwhile, dollar-rupee forward premiums rose, supported by a dip in near-maturity U.S. bond yields and the dollar-rupee overnight swap rate, which was lifted by inflows into local stocks and bonds this week. The dollar-rupee 1-year implied yield touched a near three-week high of 2.23%.
