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Indian rupee firms on inflows ahead of U.S. inflation report

·2-min read
FILE PHOTO: Illustration photo of an India Rupee note

By Anushka Trivedi

MUMBAI (Reuters) - The Indian rupee eked out gains on Wednesday, supported by dollar inflows over the last two days amid a dip in oil prices and the easing of the greenback ahead of crucial U.S. inflation data.

The partially convertible rupee ended at 79.52 per dollar, up from its close of 79.66 on Monday. India's financial markets were shut on Tuesday for a holiday.

"Markets have been consolidating in a small range ahead of the U.S. inflation data, but there have been some dollar inflows today due to the holiday on Tuesday," said Dilip Parmar, research analyst at HDFC Securities.

After a day of lacklustre trade, the rupee could be a bit volatile at the open on Thursday, but will steady itself, Parmar said, adding that the USD/INR pair faces resistance at 79.90.

National Stock Exchange USD/INR options expiring this Friday signal traders are hedging against rupee depreciation as the combined open interest on 79.50, 79.75 and 80.00 strike USD/INR call options rose to $143 million, up 35% from Monday.

The rupee's Asian peers were mostly lower before the release of data, which could offer clues on the quantum of the next rate hike when the Federal Reserve meets in September.

Expectations of a 0.75 percentage point rate increase have climbed following a strong U.S. jobs report last Friday.

The dollar index dropped 0.2% against a basket of six currencies, as investors stayed away from placing big bets. [FRX/]

The Indian currency has hovered near the 80 level, amid expectations that the Reserve Bank of India will not allow it to depreciate further from the psychologically important mark.

A slide in oil prices on expectations that Druzhba pipeline flows to central Europe would resume shortly also kept the rupee afloat. [O/R]

(Reporting by Anushka Trivedi in Mumbai; Editing by Anil D'Silva)