Rupee falls as US inflation data pushes back Fed rate cut bets

The Indian rupee ended slightly lower on Wednesday as hotter-than-expected inflation data in the U.S. raised expectations that the Federal Reserve will likely not cut rates until its June policy meeting.

The rupee settled at 83.0300 to the U.S. dollar compared with 83.0025 in the previous session.

The unit had fallen to a two-week low of 83.1150 in intraday trades but speculators' dollar sales capped losses in the local unit, traders said.

"The USD/INR pair is anticipated to encounter formidable resistance around the 83.16-20 levels," said Anindya Banerjee, head of foreign exchange research at Kotak Securities.

"Traders with long positions may consider booking profits near this resistance level. For short sellers seeking to initiate positions, it is advisable to set a stop above 83.20 on a spot basis," Banerjee said.

Consumer prices in the U.S. rose 3.1% on-year in January while the core measure increased 3.9%. Economists polled by Reuters had expected a reading of 2.9% on headline inflation and 3.7% on core.

Following the data, odds of a Fed rate cut in March were down to less than 10%, and that for May dropped to below 40%.

At the beginning of this year, investors had priced in more than six rate cuts in 2024 with the first expected in March.

The dollar index climbed to a fresh three-month high on Wednesday. Asian currencies were mostly lower.

Traders now eye U.S. retail sales and industrial production data due later this week for fresh cues on interest rates.


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