The Indian rupee ended little changed on Tuesday and hovered in a tight range tracking subdued moves in its Asian peers as markets await a key U.S. inflation report.
The rupee closed at 83.3875 against the U.S. dollar, barely changed from its close at 83.3925 in the previous session. The unit hovered between 83.36 and 83.39 on Tuesday.
Most Asian currencies were rangebound except for the Thai baht, which was down 0.8%. The dollar index fell 0.2% to 103.8.
Meanwhile, rupee forward premiums rose with the 1-year implied yield rising 5 bps to 1.65% after having receded sharply on Monday.
“Market is largely muted ahead of the U.S. CPI … but don’t expect the rupee will move sharply either way,” a foreign exchange trader at a private bank said.
U.S. inflation data due later in the day is expected to show that the core Consumer Price Index (CPI) rose to 0.3% month-on-month in November, up from 0.2% in October, according to a Reuters poll.
India will also report retail inflation data on Tuesday and economists polled by Reuters estimate that year-on-year CPI rose to 5.70% in November, up from 4.87% in October.
While there might be a “knee-jerk reaction” to the U.S. inflation number, commentary from the Federal Reserve is likely to be the more important cue for the rupee, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
The Fed will deliver its policy decision on Wednesday and is widely expected to keep rates unchanged, with investors keeping a keen eye on the central bank’s forward-looking projections and commentary.
While the Reserve Bank of India routinely intervenes to defend the rupee, the central bank’s simultaneous purchase and sale of U.S. dollars in recent weeks has left bankers puzzled, Reuters reported earlier on Tuesday.
