By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee weakened against the dollar on Friday, in-line with losses on its Asian peers, on lingering worries over the Federal Reserve rate hike path.
The rupee was at 82.56 to the U.S. dollar by 10:40 a.m. IST compared with 82.51 in the previous session.
The local currency has been in a narrow six paisa-range so far on Friday, with market participants expecting another low-volume session.
On the interbank order matching system, the volumes on Thursday were the lowest in over a month.
It was “quite evident” that markets would not see much movement on the rupee till next week’s U.S. inflation data, a spot trader at a Mumbai-based bank said.
The inflation report, important on its own, would be all the more in focus following last Friday’s U.S. jobs report, he added.
U.S. yields have spiralled higher following a consensus-beating U.S. jobs report, with the 2-year now at near 4.50%. The Federal Reserve peak terminal rate expectations have climbed to 5.15% and the size of rate cuts expected later this year has been scaled back.
Fed officials this week have indicated that more rate hikes were needed.
“All eyes are on next week’s U.S CPI print, following three consecutive soft prints,” Societe Generale said in a note. Font-end yields are re-pricing to a hawkish policy, the bank pointed out.
Asian currencies were broadly lower with the Korean won leading the way. The offshore Chinese yuan declined to 6.8150 to the dollar. The dollar index inched up to 103.35, helped by the weak risk appetite.
U.S. equity futures extended losses alongside Asian gauges. Indian shares were down about 0.3%.
The rupee forward premiums declined with the 1-year down by about four basis points at 2.14%.
(Reporting by Nimesh Vora; Editing by Nivedita Bhattacharjee)
