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The rupee closed at 83.0150 against the U.S. dollar, marginally stronger compared with its close at 83.0425 in the previous session. The local unit was little changed week-on-week as well.
The dollar index last quoted at 104.3 after slipping 0.4% on Thursday following weaker than expected U.S. retail sales and industrial production data. Asian currencies were mostly rangebound.
The dollar index rose 0.2% this week and was on course to log its fifth straight week of gain.
Meanwhile, USD/INR forward premiums ended the week lower with the 1-year implied yield down 3 basis points week-on-week at 1.76%, pressured by a paring of bets on sharp and early rate cuts by the Federal Reserve.
Forward premiums will be “relatively dampened” in the near-term as the Fed is likely to proceed carefully on rate cuts, keeping U.S. bond yields elevated, a foreign exchange salesperson at a private bank said. The odds of a Fed rate cut in March have fallen below 10% and those for May are down to 38% from 61% a week earlier, according to CME’s FedWatch tool. While continued strength in U.S. data could push the dollar index higher, the rupee is unlikely to weaken sharply, Gaurang Somaiya, a foreign exchange research analyst at Motilal Oswal Financial Services, said.
Somaiya expects the rupee to keep hovering in its prevailing range between 82.80 and 83.20 over the coming week.
Investors await the release of U.S. producer price index inflation data and remarks from Fed officials later in the day.
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