The rupee finished at 82.09 per US dollar compared with 82.1475 in the previous session. For the week, it lost 0.30%, falling for the first time since the week ended March 17.
The dollar index is set for its biggest weekly gain since February on expectations the Fed would hike rates by 25 basis points next month, following mixed inflation and retail sales data.
Over the week, several Fed officials have added to those views by pointing out that inflation remains uncomfortably high and rates must keep rising.
The dollar also benefited from risk aversion in the market, as data overnight fuelled worries over US economic growth. Treasury yields cooled, with the 10-year bond yield down 10 bps from this week’s peak to 3.5337%.
The number of Americans filing new unemployment benefits claims increased moderately last week, and a report by the Philadelphia Federal Reserve showed that manufacturing activity in the mid-Atlantic unexpectedly contracted in April.
“Lower US yields have not dampened demand for the dollar, which is being supported by a risk-off environment,” said Anindya Banerjee, head of research – FX and interest rates at Kotak Securities.
The rupee has not exhibited the expected weakness following a breakout near 82.15, but the bias and drift remains towards further decline as long as it trades above 81.83, he said.
The rupee would likely find support near 82.30 and 82.50 levels, he added.
In the broader markets, Asian currencies and stocks declined, although India’s benchmark Nifty 50 index fell less than its peers.
Markets now await US April manufacturing activity data, due later in the day.
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