The Indian rupee depreciated 10 paise against the US dollar on Wednesday ahead of Federal Reserve chair Jerome Powell's Jackson Hole speech.
The rupee traded at 83.89 against the US dollar at 11:34 a.m., according to Bloomberg data. The domestic currency closed at 83.79 on Tuesday.
The dollar index recorded a seven-month low, in correspondence with a falling trend in US Treasury yields and intense dovish bets on the US Federal Reserve, said Kunal Sodhani, vice president of Shinhan Bank.
"There remains a divergence in aggressive market anticipation for rate cuts and US data points, thus this aggressiveness may cool off," he said.
For the rupee, 83.60 acts as a base while 83.90 is a resistance, he said.
Fed Governor Michelle Bowman remains cautious about any shift in the policy because of what she sees as continued upside risks for inflation. She warned that overreacting to any single data point could jeopardise the progress already made, Sodhani noted.
The preliminary US S&P Global PMI for August is due on Wednesday. If the report shows a better than expected outcome, it could cap the downside for the US dollar, he said.
Market participants would keenly scrutinise the FOMC meeting minutes, due later in the day, for cues about Fed policy stance.
Stocks Set To Rise As Traders Await Rate Cut Clues: Markets Wrap
Oil prices, which tend to influence the domestic currency, started flat in Asian trading on Wednesday and the upside can be capped by signs of weak China demand, Reliance Securities Ltd. said in a note. A potential peace deal between Israel and Hamas could cap downside, while oil inventory data from the US could be a key trigger.
International benchmark Brent crude was 0.16% lower at $77.08 at 11:34 a.m. IST. The dollar index was 0.04% up at 101.48.
Stock Market Live: Nifty, Sensex Move In Narrow Range; Private Bank Stocks Weigh. Read more on Markets by NDTV Profit.