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INR Unable to Sustain Opening Rally on Corporate USD Demand

MUMBAI, July 14 (Reuters) - The Indian rupee was trading little changed on Friday as corporate dollar demand pushed the currency off the day's highs.

The rupee was trading at 82.0625 against the dollar at 10:34 a.m. IST, compared with 82.0725 in the previous session. The currency had hit a near two-week high of 81.94 in early trades, and is on course to log its best week in over four months.

"Interestingly, the rupee has disregarded the trend of the dollar index and remains relatively stable," said a trader with a private bank.

That has largely to do with expectations that the Reserve Bank of India will cap the rupee's upside above 81.80, importer hedging and speculators staying at bay, the trader said.

Unless the rupee appreciates above 81.80 convincingly, "we can expect a rangebound market," he added.

Asian shares and currencies rose, while the dollar index slipped below 100 to a fresh 15-month low as expectations of the Federal Reserve pausing interest rate hikes firmed up.

U.S. producer price data reinforced expectations that the Fed is nearly done with its rate hiking cycle.

Investors have completely priced-in a 25 basis points (bps) hike by the Fed at its July 25-26 meeting. Beyond that, the U.S. central bank is widely expected to pause.

The S&P 500 Index hit a 15-month high on Thursday, while U.S. yields extended declines on the Fed's expected rate outlook.

The two-year U.S. yield is now 50 bps below last week's high, while the 10-year is down almost 32 bps lower than year-to-date highs hit on July 7.

Amid a slide in U.S. yields, dollar-rupee far forward premiums continued to inch higher.

The one-year implied yield rose to an over two-week high of 1.76% intraday on Friday.

Reporting by Siddhi Nayak; Editing by Sonia Cheema

Source: Reuters

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