MUMBAI: The Indian rupee is expected to open lower against the dollar at on Tuesday ahead of the US inflation data that will help in assessing the outlook for interest rate hikes in the world’s largest economy.

The lower-than-expected India inflation print and the unexpected decline in industrial output could further weigh on the local currency, a trader said.

The rupee is tipped to open at 82.64-82.66 per US dollar compared with 82.53 in the previous session.

The US headline consumer inflation rate is expected to moderate to 7.3% in November from 7.7% in the previous month, according to economists polled by Reuters.

Indian rupee slips along with Asian FX as US inflation, Fed looms

The core inflation rate is projected to come in at 6.1%, down from 6.3%.

The data comes amid expectations that the US Federal Reserve at this week’s meeting will opt for a smaller sized rate hike.

The Fed is expected to increase rates by 50 basis points, a down shift from the 75 bps hikes it has delivered in the previous four meetings.

The Fed decision is due during US trading hours on Wednesday.

The overnight risk for Wednesday and Thursday is “exceptionally high” for rupee, a trader at a Mumbai-based bank said.

Depending on how the US inflation data shapes up, the rupee could very well “be on the wrong side of 83”.

The India inflation is negative for the rupee in the short term “on the margin” in that it probably makes its more likely that the RBI will deliver one more hike at the most, the trader said.

India’s annual retail inflation rate declined to 5.88% in November from 6.77% in the previous month.

Analysts in a Reuters poll had predicted the reading at 6.40%.

Meanwhile, the annual industrial output contracted 4% in October, its weakest performance in 26 months, after revised growth of 3.5% in September.

Analysts polled by Reuters had expected expansion of 0.3%.