Rupee retreats from opening highs on dollar demand

The Indian rupee rose against the greenback on Wednesday, tracking a rebound in broader Asian markets, but gave up opening gains on importer-led dollar buying.

The rupee was trading at 82.45 to the dollar by 10:50 am IST after opening at 82.31, compared to 82.49 in the previous session.

The currency gave up initial gains as state-run banks were seen buying dollars, likely on behalf of oil marketing companies and importers, two dealers said, adding that they were closely watching the 82.50 level. A trader said that there is demand for the dollar linked to the fixation in the market.

“A break above 82.50 amid speculative buying could push USD/INR towards 83.00 levels,” said Amit Babari, Managing Director at CR Forex Advisors, adding that their overall bias is still bullish.

Fears about the demise of Silicon Valley Bank (SVB) eased, with Wall Street rallying overnight to snap three days of losses. Asian stocks and currencies also rose.

US inflation data helped risk appetite, which was in line with expectations.

The US consumer price index (CPI) rose 0.4 percent on a monthly basis in February after accelerating by 0.5 percent in January. In the 12 months through February, the CPI rose 6.0 percent, compared to 6.4 percent in January.

The data increased the odds that the US Federal Reserve will raise interest rates on a small scale next week. A few economists, including those at Goldman Sachs, have called for a pause in the wake of the SVB crisis.

After the data, futures contracts were priced at nearly an 80 percent chance of a 25 basis point rate hike. Meanwhile, Indian trade data for February is likely to be released later in the day closely.