Rupee Closes Stronger Against Dollar After CPI Print Bolsters RBI Rate Cut Hopes

The Indian rupee strengthened against the US dollar on Friday as easing retail inflation built a stronger case for a possible earlier than expected rate cut by the Reserve Bank of India.

The rupee appreciated seven paise to close at Rs 83.90 after opening at Rs 83.92 against the US dollar, according to Bloomberg data. The domestic currency had closed at Rs 83.97 on Thursday.

"On the data front, inflation figures released yesterday remained below the Central Bank’s target of 4% for the second consecutive month, indicating that price pressures are under control," said Amit Pabari, managing director of CR Forex Advisors.

"In the near term, the rupee is expected to trade within a narrow band of Rs 83.80-84.05, while the medium-term outlook slightly broadens the range to Rs 83.70-84.05," Pabari said.

Adding to this, the Nifty surged to an all-time high of 25,400 in the final hours of trading on Thursday, driven primarily by expectations of a Federal Reserve rate cut next week.

However, the RBI's tight grip on the local currency and rising oil prices capped the rupee's gains.

Oil is on track for its first weekly gain in a month as Storm Francine disrupts crude production and a positive market sentiment prevails ahead of anticipated Federal Reserve interest rate cuts.

The US dollar index was 0.38% lower at 100.98 at 3:37 p.m. Brent Crude was trading 1.03% higher at $72.71 per barrel.

Brent crude has risen above $72 a barrel, marking its third consecutive session of increases and pushing its weekly gain to nearly 2%.