Rupee closes weaker; traders expect muted reaction to US CPI

In a recent trading session, the Indian rupee exhibited slight weakness in line with other Asian currencies. Investors remained cautious due to concerns over oil supply cuts potentially leading to imported inflation and adversely affecting the domestic currency.

Key Points:

1. Rupee Performance: The Indian rupee closed at 82.9850 against the U.S. dollar, showing a marginal decline from the previous session’s close of 82.9225. Among Asian currencies, the Thai baht experienced the most significant losses, while the onshore Chinese yuan saw a 0.2% increase to 7.28.
2. U.S. Inflation Data: Traders anticipated the release of U.S. inflation data later in the day, which could impact global markets. However, experts suggested that the rupee might not react significantly to this data.
3. Oil Price Impact: Rising crude oil prices were a cause for concern, potentially putting pressure on the rupee. Experts noted that if Brent crude futures surpassed $95 per barrel, it could further affect the currency.
4. U.S. CPI Numbers: The U.S. Consumer Price Index (CPI) numbers were expected to show a 0.2% month-on-month increase in core CPI for August, similar to July’s rate of acceleration. Headline CPI was projected to rise by 0.6% month-on-month, up from 0.2% in July.
5. Market Reaction: Analysts suggested that the rupee’s reaction to the U.S. CPI data would likely be subdued, even if the data surprised market expectations. They expected the rupee to remain stable unless there was a significant increase in Brent crude oil prices.
6. Global Factors: The dollar index in Asia rose to 104.71, and the yield on the 10-year treasury bond also experienced a slight increase to 4.30%. Closely monitored core CPI figures could influence the Federal Reserve’s decisions, potentially impacting currencies like the rupee.
7. Federal Reserve Meeting: The Federal Reserve was expected to maintain steady interest rates in its upcoming meeting, contributing to the market’s cautious sentiment.

In summary, the Indian rupee displayed slight weakness in response to concerns over oil supply cuts and global economic conditions. While U.S. inflation data was a focal point for markets, the rupee’s reaction was expected to be muted, with a strong dependency on developments in crude oil prices.