Indian rupee strengthens on dollar weakness, likely RBI intervention

MUMBAI, Aug 10 (Reuters) - The Indian rupee strengthened against the U.S. dollar in the final minutes of trade on Thursday as the dollar weakened, and traders cited likely dollar sales by the Reserve Bank of India.

The rupee closed at 82.7125, gaining 0.12% from the previous session.

The RBI was possibly selling dollars in the final minutes of trade, two traders at state-run banks said. Foreign banks were also selling dollars following a correction in the dollar index , one of the traders said.

In its monetary policy decision on Thursday, the Indian central bank kept rates unchanged but moved to reduce the amount of cash in banking system as inflation concerns resurfaced due to a spike in food prices.

Attention now shifts to U.S consumer inflation data (USCPF=ECI), due at 6:00 p.m. IST (1230 GMT), which is expected to show that core prices rose by 0.2% in July for a yearly gain of 4.8%.

A softer-than-expected inflation reading could signal that the U.S. economy is cooling, while an inflation number above expectations could raise the possibility of another rate hike from the U.S. Federal Reserve.

\“Unless we get a completely out of the blue number, the rupee should not react much,\” said Abhilash Koikkrra, head of forex & commodities at Nuvama Professional Clients Group said.

While the rupee has not depreciated below the 83 mark, that level might not hold for long, a forex trader at a state-run bank said.

The expectation is that it will move to 83.20-25 levels over the next few weeks but not much beyond that, the trader said.