The Indian rupee opened marginally higher against the US dollar and the UAE dirham on Wednesday.
The slight increase comes after a decline in US Treasury yields ahead of the key US inflation data that will provide cues on the Federal Reserve’s interest rate path this year.
The South Asian currency was trading at 83.4775 to the US dollar (22.75 against the UAE dirham) at 9am, UAE time, compared to 83.52 (22.76) in the previous session.
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The Indian rupee has been holding a narrow range in recent days, circling the 83.50 handle.
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A handful of traders reckon that the Reserve Bank of India has been lining up dollar offers on the interbank order matching system to prevent the rupee from slipping to an all-time low of 83.5750.
“I can understand that because of the RBI that upside (on USD/INR) beyond 83.50 is difficult. However, how is that the dips too are practically non-existent,” a forex trader at a bank said.
“It will be one more day of nothing.”
The 10-year US Treasury yield was down to 4.44 per cent and the dollar index slipped below 105 before the US consumer inflation data. Economists polled by Reuters expect the core consumer price index to rise 0.3 per cent month-on-month in April.
US equities advanced on Tuesday and futures on the S&P 500 Index were up in Asia.
Ahead of the consumer inflation print, data showed US producer prices increased more than expected in April. However, the March print was revised to show a 0.1 per cent decline against a 0.2 per cent increase.
Fed Chair Jerome Powell said the April producer prices report was more “mixed” than “hot,” considering that prior data was revised lower while the April’s data came in higher than expected.
U.S. consumer inflation figures will tell us whether the country has taken further steps in the disinflation process, or if prices remain too sticky for the Fed to cut, ING Bank said. “The latter seems more likely,” it added.
(With inputs from Reuters)