MUMBAI, Feb 15 (Reuters) - The Indian rupee declined to more than a one-month low on Wednesday after the U.S. inflation print cemented expectations of more Federal Reserve rate hikes.
The rupee was at 82.8550 per dollar by 10:12 a.m. IST, against its previous close of 82.7550. It was trading near its lowest levels since Jan. 4 and was a whisker away from the key 83 mark.
The Reserve Bank of India has previously protected the 82.90-83 zone and that is a good level for participants to sell their dollars, so it's possibly going to be hard to breach, said a trader at a Mumbai-based bank.
A large private bank was offering dollars on Wednesday morning, probably for an exporter client, another trader said.
Asian stocks and currencies dropped after data showed the U.S. headline consumer inflation index (CPI) rose 0.5% month-on-month in January and core inflation by 0.4%.
While the month-on-month change in the headline and core inflation was in line with expectations, the annual rate of 6.4% was above estimates.
"This print strengthens the case for further interest rate increases in the U.S. and for rates to remain higher for longer," said HDFC Bank economists in a note.
"Going by recent statements of Fed members, the committee might be divided on the terminal rate, with some members now favouring a higher terminal rate than previously expected."
Fed officials on Tuesday stayed hawkish, with the New York Fed President saying rates could even be between 5.0%-5.50% by the end of the year.
Money markets have fully priced in a 25 basis points (bps) hike by the Fed in March and are almost certain of one more in May. Chances of a 25-bps hike at the June meeting have also increased to 47.5% from 6.2% a month ago, HDFC Bank note added.
The dollar index nudged higher, taking support from elevated U.S. yields.
