Rupee closes slightly higher supported by dollar inflows

By Jaspreet Kalra

MUMBAI (Reuters) – The Indian rupee ended slightly stronger on Thursday, aided by dollar inflows, even as most of its Asian peers were on the back foot as investors moderated their expectations of early U.S. rate cuts this year.

The rupee ended at 83.23 against the U.S. dollar, higher by 0.05% compared with its close at 83.2750 in the previous session.

The dollar index edged lower to 102.14 after touching a more-than-two-week high in the New York session, supported by an uptick in U.S. yields and tepid risk appetite.

While the rupee hovered in a tight range in the earlier half of the session, dollar inflows post the mid-day fixing window aided gains in the local unit, a foreign exchange trader at a private bank said.

But “constant (dollar) buying by state-run banks,” kept the rupee’s gains constrained, the trader added.

Most Asian currencies weakened, with the Korean won leading losses down by 0.3%.

The rupee’s prevailing tight range has made the market “lacklustre,” and till it breaks on either side, it’s tricky to assess the overall trend, said Abhilash Koikkaraa, head of forex and rates at Nuvama Professional Clients Group.

Minutes from the U.S. Federal Reserve’s December meeting, released on Wednesday, signalled a growing sense that inflation is under control but offered no direct cues on when rate cuts might commence.

The Fed is “making real progress” towards controlling inflation and the hoped-for soft landing is “increasingly conceivable,” Richmond Federal Reserve President Thomas Barkin said on Wednesday.

Investors now await U.S. initial jobless claims data due later in the day followed by the key non-farm payrolls and unemployment data on Friday.

The unemployment rate likely ticked up to 3.8% in December, up from 3.7% in November, according to a Reuters poll.

(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)