MUMBAI, Aug 12 (Reuters) - The Indian rupee is expected to open little changed to the U.S. currency on Friday amid a recovery in the dollar and expectations that the Reserve Bank of India will step in to support the local unit.
The rupee is tipped to open at 79.60-79.65 per U.S. dollar in initial trades, as against 79.63 in the previous session. The local unit on Thursday was unable to sustain the gains prompted by the softer-than-expected U.S. inflation report. The rupee was the worst performing major Asian currency on Thursday.
"Yesterday's session showed the extent to which there is demand for the dollar on any significant dips (on USD/INR pair). There was heavy dollar buying from importers and from oil companies," a trader at private sector bank said. "On the other side, there is the RBI and it protecting the 80 levels."
The dollar rose against its major peers on Friday, recovering from the losses suffered following the U.S. inflation data. Comments from Federal Reserve officials that more rate hikes were needed despite the slowdown in inflation has tempered expectations of a less hawkish U.S. central bank.
On Thursday, San Francisco Fed President Mary Daly said that while a 50 basis point interest rate hike in September "makes sense", she is open to a bigger increase if data warrants.
The 2-year Treasury yield has climbed back to near 3.20% after having fallen to 3.08% following the U.S. inflation data.. The August U.S. consumer inflation data will be key in gauging whether the Fed will raise rates by 50 basis points or 75 basis points at the September meeting, traders said.
Meanwhile, India's inflation data is due on Friday. The July inflation rate is expected to ease from the previous, but remain above the RBI's upper tolerance limit.
** One-month non-deliverable rupee INRNDFOR= forward at 79.82; onshore one-month forward premium at 21.78 paise
** USD/INR NSE August futures closed on Thursday at 79.74
** USD/INR forward premium INR1FC= as of Aug. 11 for end current month is 7.8 paise
** Dollar index =USD up at 105.25
** Brent crude futures LCOc1 down 0.5% at $99.1 per barrel
** Ten-year U.S. note yield at 2.88%, India 10-yr bond IN065432G=CC yield at 7.27%
** SGX Nifty SINc1 nearest-month futures flat at 17,693
** As per NSDL data, foreign investors bought a net $308.8mln worth of Indian shares on Aug. 10
** NSDL data shows foreign investors bought a net $89.5 mln worth of Indian bonds on Aug. 10
(Reporting by Nimesh Vora Editing by Dhanya Ann Thoppil)
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