The Indian rupee softened marginally on Tuesday, pressured by weakness in other Asian currencies and elevated oil prices, but traders anticipate it to remain above the 83 level during the session.
The rupee 
USDINR was at 82.9350 against the U.S. dollar as of 10:05 a.m., marginally lower than its previous session close at 82.9425.
The dollar index was at 103.69, its highest level in two weeks while Asian currencies weakened with the Korean won down 0.4% and leading losses.
The Japanese yen was down 0.5% at 149.86 after the Bank of Japan ended eight years of negative interest rates.
Dollar bids from local oil companies also exerted pressure on the rupee during early trading, a foreign exchange trader with a state-run bank said.
Higher oil prices may pressure the local currency but it’s unlikely to fall below 83, the trader added.
Brent crude oil futures were last quoted at $86.73 after hitting a four-month high on Monday following reduced crude exports from Iraq and Saudi Arabia, alongside signs of stronger demand and economic growth in China and the U.S.
Despite short-term hurdles, the long-term outlook remains “positive for the rupee’s appreciation,” said Amit Pabari, managing director at foreign exchange advisory firm CR Forex.
Meanwhile, dollar-rupee forward premiums fell, with the 1-year implied yield (INRANPRM1Y=RR) down 1 basis point (bp) at 1.60%, marking its lowest level in over three months.
Receding expectations of Fed rate cuts have sustained pressure on dollar-rupee forward premiums, with the odds of a June rate cut falling to about 55% from about 70% a week earlier, according to CME’s FedWatch tool.
The Fed will deliver its policy decision on Wednesday, with focus centred on remarks from Chair Jerome Powell and the interest rate dot plot for cues on the future rate trajectory.
