Rupee nearly flat wedged between yuan weakness, dip in US bond yields
By Jaspreet Kalra
MUMBAI, July 3 (Reuters) -The Indian rupee was little changed on Wednesday as a dip in U.S. bond yields did little to help Asian currencies which remained under pressure due to weakness in the Japanese yen and the Chinese yuan.
The rupee INR=IN was at 83.50 against the U.S. dollar as of 10:20 a.m. IST, nearly unchanged from its previous close at 83.5050.
The dollar index dipped on Tuesday after comments from Federal Reserve Chair Jerome Powell pushed bond yields in the United States lower, offsetting the impact of a strong domestic jobs report.
Powell said the U.S. was "getting back on a deflationary path" but cautioned that the Fed would need more evidence of falling inflation before cutting rates.
Weakness in the dollar was of little help to the rupee's Asian peers though as the offshore Chinese yuan CNH= fell to 7.31, its weakest level since November, while the Japanese yen was pinned close to its lowest in 38 years.
The rupee is likely to "keep its sideways trend", with weakness capped near 83.60, a foreign exchange trader at a state-run bank said.
The Reserve Bank of India may allow gradual depreciation if the yuan weakness continues, the trader added.
The offshore Chinese yuan has declined about 2.5% over 2024, while the rupee is down about 0.3%. Analysts broadly expect the rising odds of a second U.S. presidential term for Donald Trump to keep the Chinese currency under pressure.
"The (Indian) central bank's tolerance for rupee appreciation against yuan beyond current levels might be limited," foreign exchange advisory firm IFA Global said in a note.
The focus now is on the minutes of the Fed's latest policy meeting and U.S. ADP employment data, both of which are due later in the day, for cues on the future path of U.S. policy rates.
Reporting by Jaspreet Kalra; Editing by Sohini Goswami
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