The currency traded in a narrow 10 paisa range as traders kept positions light heading into the release of the critical March U.S. consumer price index (CPI) data. The core CPI likely rose by 0.4% month-on-month in March, according to economists polled by Reuters. That would be down from the 0.5% increase in February, but well above the pace required for bringing annual inflation to Fed's 2% target.
This will probably bolster expectations of a 25 basis-point (bps) hike by the Fed in May, following a strong jobs report last week, said a private bank trader. Those bets were currently near 74%, according to Fed funds futures. "Despite fairly subdued markets in the run-up to Fed minutes and CPI, there is every chance of swings one way or another on outcome-expectations gap," Mizuho bank analysts wrote in a note. The dollar index hovered near Tuesday's lows, while most Asian currencies rose slightly.
Minutes of the Fed's March meeting, where it hiked rates but
sounded dovish, are also due later in the day.
The hike was interpreted as possibly the last one given the
banking turmoil, however, a calming of the crisis and strong
data since then has caused market repricing of the Fed peak
rate.
Meanwhile, India's inflation data reading is likely to show
headline CPI eased in March to 5.80%, dipping below the Reserve
Bank of India's upper tolerance limit of 6% for the first time
this year, according to a Reuters poll.
The data follows RBI's surprise move last week to hold rates
steady at 6.50%.
(Reporting by Anushka Trivedi; editing by Eileen Soreng)
