Rupee falls tracking weak Asian peers, traders eye index inclusion

The Indian rupee snapped a three-session winning run on Wednesday, as weakness across regional peers and month-end dollar demand from importers weighed on the currency.

The rupee closed at 83.5700 to the U.S. dollar, down from 83.4325 in the previous session.

"With the Chinese yuan below 7.29 against the dollar, the rupee was bound to depreciate," said a dealer with a private sector bank.

"A breakout below 83.60 (on the rupee) was prevented because of dollar sales by a public sector bank. It is difficult to ascertain whether it was on behalf of the central bank," the dealer added.

Asian currencies were down at least 0.1% each to the dollar, with the onshore Chinese yuan back at its lowest level since mid-November.

The U.S. dollar firmed after Federal Reserve Governor Michelle Bowman on Tuesday said that holding the policy rate steady "for some time" will probably be enough to bring inflation under control. Bowman also repeated her willingness to raise borrowing costs if needed.

Investors now await the U.S. personal consumption expenditures price index report, due Friday, for fresh cues on when the Fed can begin cutting interest rates.

The rupee remains supported by expectations of dollar inflows spurred by India's inclusion in the JPMorgan emerging market debt index on June 28. However, uncertainty around the size and timing of the inflows persists.

"The inflows should provide additional support to the rupee, and help prevent any undue depreciation beyond 83.70," said Amit Pabari, managing director at FX advisory firm CR Forex.

The rupee is expected to trade in a range of 83.00-83.70 and a breakout on either side could lead to 50-80 paisa moves, Pabari added.