The Indian rupee was little changed on Friday as local dollar demand kept up the pressure despite the dollar index hovering near its weakest level in four months.
The rupee was at 83.3025 as of 10:55 a.m. IST, little changed from its close of 83.33 in the previous session.
The dollar index was slightly lower in Asia hours at 101.89 after dropping nearly 0.9% on Thursday.
Strength in the euro and British pound drove down the dollar after the Bank of England and European Central Bank pushed back on expectations of rate cuts in 2024.
“We did not discuss rate cuts. No discussion, no debate on this issue,” ECB President Christine Lagarde said on Thursday.
U.S. Federal Reserve Chair Jerome Powell had said on Wednesday that the question of when it will be appropriate to cut rates is “coming into view.”
Investors are currently pricing in 150 basis points (bps) worth of rate cuts over 2024 in the United States, according to CME Group’s FedWatch tool.
But the rupee has been largely unable to gain on the turn in the dollar as dip-buying interest from importers has kept gains capped, traders said.
“Will watch for a drop below 83.20 (on USD/INR) to enter short position … Otherwise range play as usual,” a foreign exchange trader at a foreign bank said.
Asian currencies were mostly rangebound but the Chinese yuan rose 0.2% to the U.S. dollar and was hovering near its strongest level in about six months.
The rupee has strong support at 83.40 with “high potential,” to log gains amid supportive global cues, Amit Pabari, managing director at fx advisory firm CR Forex, said.
Meanwhile, rupee forward premiums declined on likely profit booking. The 1-year implied yield was lower by 4 bps at 1.71%.
