The Indian rupee closed stronger against the dollar on Friday as the US inflation broadly cooled in June, strengthening bets for an earlier rate cut by the Federal Reserve.
The local currency appreciated 3 paise to close at Rs 83.53. It had opened at Rs 83.54 against the greenback, according to Bloomberg. The rupee had closed at Rs 83.56 on Thursday.
The US CPI for June fell 0.1%, compared to a Bloomberg estimate of 0.1%. The core measure increased by 0.1% month-on-month, slower-than-the expected consensus of 0.2%.
"The unexpected decline in CPI inflation stoked hopes that the Fed would cut rates soon," Anil Bhansali, executive director of Finrex Treasury Advisors LLP, said. "The dollar index slipped lower for a third consecutive session on Friday as market participants raised their bets for a September rate cut."
In his hearing before the House Financial Services Committee, Fed Chair Jerome Powell remained cautious about inflation. He reiterated that the Fed still lacks firm confidence to cut rates anytime soon, even though inflation need not necessarily drop below the 2% threshold in order to start the rate-easing cycle.
The rupee was unfazed by changes in the world markets and that it looks like the dollar-buying syndrome has resumed and may keep the dollar well-bid for some time, according to Bhansali.
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