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Rupee squeezed by dollar uptick on Fed outlook, counts on RBI help

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By Nimesh Vora

MUMBAI, June 14 (Reuters) -The Indian rupee is expected to broadly struggle on Friday in the wake of an uptick in the dollar amid hawkish Federal Reserve interest rate projections.

Non-deliverable forwards indicate the rupee INR=IN will open at 83.55-56 to the U.S. dollar, compared with 83.5425 in the previous session.

The rupee was within sight of the all-time low of 83.5750 that was largely avoided on the intervention by the Reserve Bank of India, both in non-deliverable forward (NDF) and spot markets.

"Will the RBI allow a new higher range (for the dollar/rupee) is what is it about right now," a currency trader at a bank said.

"It is irrelevant at this point to discuss the merit or otherwise (of allowing the rupee to weaken in the backdrop of the overall dollar strength). You just play the price action."

The dollar index was back to the 105 handle, despite a soft U.S. producer price index (PPI) print and a rise in jobless claims. U.S. producer prices unexpectedly fell in May, signalling that price pressures were abating.

This came after data showed that U.S. consumer prices rose at a lesser pace than expected.

Both the PPI and CPI inflation measures have elements that are used to calculate monthly PCE inflation, ANZ Bank said in a note.

"Our back-of-the-envelope calculations estimate May core PCE rose in the region of 0.1% month-on-month. A 0.1% m/m would leave the annual measure of May core PCE inflation at 2.56% year-on-year, down from 2.75% in April."

Core PCE inflation is the Fed's preferred gauge of measure.

Fed members are still indicating a cautious stance on rate cuts that supported the dollar. The median of the Fed dot plot pointed to just one rate cut this year against two expected by economists.

KEY INDICATORS: ** One-month non-deliverable rupee INRNDFOR= forward at 83.62; onshore one-month forward premium at 7 paise

** Dollar index =USD at 105.18 ** Brent crude futures LCOc1 down 0.4% at $82.4 per barrel ** Ten-year U.S. note yield at 4.27%

** As per NSDL data, foreign investors bought a net $81.3 mln worth of Indian shares on June 12

** NSDL data shows foreign investors bought a net $250.3 mln worth of Indian bonds on June 12

Reporting by Nimesh Vora; Editing by Sohini Goswami


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