Importers more active heading into key US data; rupee, forwards rangebound

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee and forward premiums barely budged on Tuesday ahead of data that is expected to show continued disinflation in the United States and shape expectations on when the Federal Reserve will cut rates.

The rupee was quoted at 83.0125 to the U.S. dollar at 11:02 a.m. IST, nearly unchanged from 83.0025 in the previous session. The local currency has been in a three-paisa range so far while the one-year dollar/rupee forward premium remained at 1.80%.

“Along expected lines, not much is happening. The one thing of note from our side is that importers are relatively more active today,” a fx salesperson at a bank said.

Doubt it has anything to do with the (upcoming) US data, he said, considering that it was unlikely there would be any significant move on the rupee on Wednesday.

The U.S. January inflation data, out later in the day, is expected to show consumer prices rose by 0.2% month-on-month, while the more important core measure increased 0.3%.

On a year-on-year basis, headline inflation is expected to have fallen to 2.9% from 3.4% and core is expected to have declined to 3.7% from 3.9%, reinforcing the disinflation process.

Heading into the data, investors are pricing in a very low probability of a rate cut at the March policy meeting, while the outcome of the May meeting is nearly a coin toss.

If the US headline and core inflation comes in below expectations, the dollar index likely corrects to 103.50 and the rupee would appreciate to near 82.80 levels, Amit Pabari, managing director at Mumbai-based CR Forex, said.

If the data comes in above expectations, a low probability outcome, the dollar index can move above 104.50 levels and the rupee could depreciate towards 83.10-83.25, he said.

The dollar index was last at 104.20.

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)


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