MUMBAI – The Indian rupee closed lower on Friday, tracking a fall in Asian peers, after U.S. bond yields surged in light of data that signalled inflation in the world’s largest economy could be sticky.
The rupee closed at 82.8775 against the U.S. dollar, down from its close of 82.8175 in the previous session. The local unit notched a weekly loss of about 0.1%, its first week-on-week decline since mid-February.
Asian currencies weakened, with the Korean won down nearly 0.9% and leading losses.
The dollar index was was slightly lower at 103.3 after climbing 0.5% on Thursday, lifted by the jump in U.S. bond yields after data showed that the U.S. PPI for final demand rose more than expected in February.
While the rupee had opened weaker at 82.9525, dollar sales from exporters and foreign banks, likely on behalf of custodial clients, helped the local unit trim its losses, traders said.
The rupee is likely to hover between 82.70 and 83.07 over the coming week, Arnob Biswas, head of foreign exchange research at SMC Global Securities said.
The U.S. Federal Reserve and Bank of Japan’s policy decisions will serve as the key triggers for the rupee next week, analysts said.
While the Fed is widely expected to keep rates unchanged in its March 19-20 meeting, investors will keep a close eye on Chair Powell’s remarks and the policy rate dot plot for cues on future trajectory of interest rates.
The Bank of Japan’s policy decision due on March 19 will also be key amid rising odds that the central bank will end eight years of negative interest rate policy next week.
Meanwhile, data showed that India’s merchandise trade deficit in February stood at $18.71 billion, along expected lines, and up slightly from $17.49 billion in January.
