Rupee declines to lifetime low hurt by weak yuan, NDF dollar bids

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Rupee declines to lifetime low hurt by weak yuan, NDF dollar bids

By Jaspreet Kalra

MUMBAI (Reuters) – The Indian rupee weakened to its record low on Wednesday pressured by a slide in the ******** yuan and heightened dollar bids in the non-deliverable forwards (NDF) market but central bank intervention helped limit losses.

The rupee hit a low of 84.8650 against the U.S. dollar before closing at 84.83, up marginally on the day.

The rupee has weakened 0.4% in December, underperforming many of its regional peers as concerns over slowing economic growth and the appointment of a new RBI chief has fuelled expectations of rate cuts next year, hurting the local unit.

Dollar-selling intervention by the Reserve Bank of India (RBI), via state-run banks, helped the rupee avert deeper losses, traders said.

The offshore ******** yuan declined 0.4% to 7.28 after Reuters reported that China was considering allowing the yuan to weaken next year to weather higher tariffs, weighing down most Asian currencies.

The dollar index, meanwhile, was up 0.2% at 106.5 ahead of the release of the closely watched U.S. inflation data later on Wednesday to gauge the future path of Federal Reserve policy rates.

“While it is tempting to say that the Fed has moved on from the inflation story, any upside surprise to the already high consensus expectation for core inflation at 0.3% month-on-month would likely send the dollar higher,” ING Bank said in a note.

Investors are currently pricing in a 86% chance of a 25-basis-point cut by the Fed this month, according to CME’s FedWatch tool.

Meanwhile, dollar-rupee forward premiums rose, with the 1-year implied yield rising 11 basis points to 2.17%.

Strong interbank paying interest and a rise in near forward premiums, boosted by demand related to arbitrage between outright and non-deliverable forwards, helped the premiums, traders said.

(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)

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