MUMBAI, Nov 26 (Reuters) - The Indian rupee was little changed on Wednesday, caught between firm local dollar demand and rising conviction that a rate cut by the U.S. Federal Reserve was on the cards.
The currency traded at 89.20 per U.S. dollar as of 10:00 a.m. IST, barely changed from 89.22 previously.
The dollar index slipped 0.2% to 99.6 after soft U.S. data, as well as a Bloomberg report flagging White House economic adviser Kevin Hassett as the frontrunner for Fed chair reinforced expectations of policy easing.
Most Asian currencies and equities firmed on the dovish cues, but the rupee was weighed down by steady importer hedging and weak portfolio flows. Foreign investors have sold nearly a net $1 billion of Indian equities so far in November, taking year-to-date outflows to $17 billion.
Analysts said the rupee was moving on the same cross-currents that shaped Tuesday’s session.
"Each time the central bank steadied the ship, fresh dollar buying — especially from importers — pulled the rupee back to 89.26–89.30, showing that underlying demand remains strong," said Amit Pabari, managing director at FX advisory firm CR Forex.
"Any positive development on the U.S.–India trade deal front could give sentiment a quick lift and strengthen the rupee’s footing," he said.
A trader at a Mumbai-based bank, meanwhile, said state-run banks were spotted offering dollars intermittently, helping cap the rupee's weakness.
Elsewhere, India's benchmark equity index, the Nifty 50 rose 0.8% while the yield on the 10-year sovereign bond declined to a two-week low as traders leaned in on bets that the Reserve Bank of India may cut policy rates next week.
"We maintain our view for a 25bp cut at the Dec meeting. Commentary will be balanced," DBS said in a note.
Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee
Source: Reuters