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INR Weakens Slightly on USD Demand from State-Run Banks, Importers

MUMBAI, Feb 9 (Reuters) - The Indian rupee weakened on Friday, pressured by dollar demand from state-run banks and importers, but traders expect the downside to be contained as sharp upticks on the dollar-rupee pair are likely to attract offers.

The rupee was at 82.9925 against the U.S. dollar as of 10:30 a.m. IST, slightly lower compared with its close of 82.9550 in the previous session.

The dollar index was last quoted at 104.2. It hit a high of 104.43 on Thursday after data showed that initial claims for unemployment in the U.S. dropped more than expected in the week ended Feb. 3, signalling strength in the county's labour market.

Dollar demand from state-run banks alongside the jump in oil prices weighed on the rupee in early trading on Friday, a foreign exchange trader at a private bank said.

Brent crude oil futures were quoted at $81.6 per barrel after rising 3% on Thursday after Israel rejected a ceasefire offer from Hamas.

But a "sell on upticks", bias on the dollar-rupee pair should help limit the local currency's decline on Friday, Apurva Swarup, vice president at Shinhan Bank India said

Meanwhile, policymakers at the U.S. Federal Reserve continued to push back on market expectations of early rate cuts.

"I will need more, additional evidence" to confirm inflation is trending toward the Fed's 2% goal, Boston Federal Reserve Bank President Susan Collins said on Thursday while referring to the timing of potential Fed rate cuts.

Though delaying cuts until the 12-month rate hits that goal "would be waiting too long," Collins added.

Strong U.S. economic data and remarks from Fed officials have prompted a pullback in rate cut expectations, with investors pricing in a near 39% chance of rates staying unchanged in May, up from about 6% as of Feb. 1, according to CME's FedWatch tool.

Reporting by Jaspreet Kalra; Editing by Janane Venkatraman

Source: Reuters

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