Rupee ends slightly higher; traders await US data, Fed minutes

MUMBAI (Reuters) – The Indian rupee closed marginally higher on Wednesday, supported by dollar sales from foreign banks, even as most of its Asian peers fell pressured by a recovery in the U.S. dollar index.

The rupee ended at 83.2750 against the dollar, slightly higher compared with its close at 83.3175 in the previous session.

The dollar index last quoted at 102.3 after having risen 0.8% overnight as market participants moderated bets on interest rate cuts by the Federal Reserve. The 10-year U.S. Treasury yield rose to 3.98%.

Investors are currently pricing in a near 75% chance of a Fed rate cut in March, down from about 85% a week earlier, according to CME Group’s FedWatch tool.

The rupee opened flattish but logged slight gains in the latter half of the trading session, aided by dollar sales from foreign banks, a foreign exchange trader at a state-run bank said.

Asian currencies were mostly lower, with the Malaysian ringgit leading losses, down by 0.6%.

Market participants now await key U.S. economic data due this week starting with the ISM manufacturing purchasing managers’ index (PMI) due later on Wednesday, which is expected to have risen to 47.1 in December from 46.7 in November, according to a Reuters poll.

The minutes of Fed’s December policy meeting are also due later in the day and will offer clues on how well-placed market expectations are about potential cuts in policy rates.

While the data and minutes will be closely watched, it’s unlikely to budge the rupee out of its prevailing range, Anindya Banerjee, head of FX research at Kotak Securities, said.

Meanwhile, the rupee’s muted volatility has prompted banks and corporate treasuries to ramp up activity in the euro/dollar, pound/dollar and the dollar/yen currency pairs in search for better returns, Reuters reported earlier on Wednesday.

(Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala)