The Indian rupee depreciated against the U.S. dollar.
The local currency weakened by 4 paise to 82.80 at close against the greenback on Wednesday. It closed 82.76 on Tuesday.
"The U.S. dollar regained its strength after data showed the annual inflation rate in the U.S. slowed slightly to 6.4% in January 2023, but was above market forecasts of 6.2%. Higher-than-expected inflation data and a strong labour market raised the prospects of the Fed keeping rates elevated for a longer period," said ICICI Securities in a note. "A rise in U.S. 10-year Treasury yields also supported the dollar."
"Even though CPI numbers showed markets that the path to inflation normalisation is long, the overall release was considered broadly in line because a hawkish Fed was expected even before the data release due to the previous payroll data surprise," according to Ritesh Bhansali, vice president at Mecklai Financial Services Ltd.
U.S. Treasury yields increased marginally after declining prior to the data. The dollar index was at 103.32, and Brent crude oil was trading at $85.3 per barrel.
"Since the CPI data failed to provide the market with any more significant hints, the US retail sales data expected today has gained more importance," Bhansali said. "It is expected to release at 1.9% vs. -1.1% in December."
"Higher retail sales figures would indicate that the economy is strong enough to trouble markets and fuel another wave of dollar gains. The retail sales would be scrutinised for confirmation of economic health in light of the most recent US employment figures," he said.
"It needs to be seen whether the RBI protects the rupee here or allows the weakness to continue," said Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors LLP. "There could be a flow from HDFC Ltd., which is selling Rs 25,000 crore of bonds," he said.
The Indian rupee is expected to trade between 82.65 and 83.10 levels during the day, according to Bhansali.
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