The Indian rupee rose on Friday as a further decline in the dollar index propped up Asian currencies, with softer oil prices and positive news from China adding to the momentum.
The rupee was up 0.32% to 82.16 per dollar by 10:48 a.m. IST, hovering near the 82.15 mark, which traders said would be a tough level to break.
Considering that the dollar index is trading below 105, the rupee has reasons to hold the 82.15-82.20 levels, but breaching that further may be difficult as oil companies would step in to buy dollars, said a trader with a private bank.
Brent crude futures were headed for weekly losses, having slumped to near one-year lows this week.
Despite positive cues, the "USD/INR is not able to converge vigorously with its peers, probably due to shorts having been burned badly in the recent surge," said Anindya Banerjee, head of research for forex and interest rates at Kotak Securities, referring to the pre-monetary policy rally in the currency pair.
Asian currencies and equities jumped on Friday as the dollar index slipped further, set for a third straight session of losses.
The Chinese yuan touched a three-month high as Beijing reported a drop in COVID cases and a top government official said told state media that the country's shift in pandemic policy would allow the economy to pick up pace.
More weak U.S. data overnight stoked concerns about the Federal Reserve's rate hikes tipping the world's biggest economy into a recession, which weighed on the dollar.
Investors now await U.S. November producer prices data later in the day and consumer inflation data next Tuesday, both of which are crucial to determine the Fed's monetary policy decision, due Dec. 14.
Money markets are pricing in a 93% chance that rates will be raised by 50 basis points. (Reporting by Anushka Trivedi in Mumbai; Editing by Savio D'Souza)