The Indian rupee weakened against the U.S. dollar in the Asian session on Wednesday, as traders speculate that the Reserve Bank of India (RBI) is likely to intervene in the foreign exchange to limit the significant weakening of the rupee.

Traders increased their bets on interest rate reduction after career bureaucrat Sanjay Malhotra was named the RBI's next governor.

Moreover, India's CPI inflation data will be released on Thursday, along with Industrial and Manufacturing Output report.

Investors await key U.S. consumer price inflation reports, due later in the day.

The report is expected to show U.S. consumer prices rose by 0.2 percent for the fifth straight month in November. The annual rate of consumer price growth is expected to tick up to 2.7 percent from 2.6 percent in October.

Core consumer prices, which exclude food and energy prices, are expected to increase by 0.3 percent for the fourth straight month while the annual rate of core consumer price growth is expected to remain at 3.3 percent.

The CPI report along with the release of producer price inflation figures on Thursday might impact the outlook for U.S. interest rates.

According to CME Group's FedWatch Tool, markets currently price in an 85 percent chance of a Fed rate cut next week.

Whatever the policy decision, there is much uncertainty regarding what could happen to Fed interest rates next year.

Against the U.S. dollar, the rupee fell to a record low of 85.060 from an early high of 84.82. At yesterday's close, the rupee was trading at 84.88 against the greenback.

The next possible support level for the rupee is seen around the 86.00 region.

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