Rupee little changed, forward premiums inch higher
rupee was largely flat on Wednesday despite broad weakness in its Asian peers, with traders expecting the local currency to trade in a tight range through the day.
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The rupee was at 83.1425 against the U.S. dollar as of 10:55 a.m. IST, barely changed from its close at 83.15 in the previous session.
The dollar index edged lower to 103.43 in Asia hours after having risen to its highest level in six weeks on Tuesday. Asian currencies weakened, with the Indonesian rupiah leading losses and down by 0.5%.
It is key to watch if the rupee falls below the 83.20 mark, which could open up room for further weakness, Dilip Parmar, a foreign exchange research analyst at HDFC Securities, said.
The rupee has faced pressure in recent sessions, spurred by equity-related outflows and paring of aggressive rate cut expectations in the United States.
Investors are currently pricing in a little over 50% chance of the Federal Reserve keeping rates unchanged in March, up from nearly 35% a week earlier, according to CME's FedWatch tool.
Foreign investors have sold nearly $2 billion worth of Indian equities in January so far, which follows net buys worth $7.9 billion in the previous month.
Equity flows would be key to watch going forward and could strengthen the «buy on dips bias (on the dollar-rupee pair),» a foreign exchange trader at a private bank said.
Meanwhile, rupee forward premiums inched up on Wednesday, with the 1-year implied yield up 2 basis points at 1.88%.
Investors now await key U.S. economic data that could further impact rate cut expectations in the United States.
The first estimate of U.S. gross domestic product for the fourth quarter is due on Thursday,
