MUMBAI: The Indian rupee ended nearly flat on Wednesday as US dollar demand from importers and foreign banks eroded the currency’s early gains that came due to growing expectations of rate cuts by the Federal Reserve.

The rupee closed at 83.9475 against the dollar, little changed from its close at 83.97 in the previous session.

While the currency rose to a high of 83.9025 early in the session, traders said it succumbed to pressure from dollar bids by foreign banks and importers.

The dollar index was down 0.1% at 102.4 after benign wholesale US inflation data that helped Asian currencies rise, with the Indonesian rupiah’s 1% increase leading.

However, US retail inflation data, due later on Wednesday, is more crucial to gauge the extent of Fed rate cuts this year. Investors are currently pricing in about 107 basis points of rate cuts over 2024.

Unless there is a big surprise in US inflation, the rupee is unlikely to shift out of its 83.85-83.97 range in the absence of large inflows, a foreign exchange trader at a private bank said.

The stabilisation in the unwinding of carry trades has also helped risk sentiment and higher beta currencies, MUFG Bank said in a note.

The rupee had faced headwinds due to the unwinding of the Chinese yuan- and Japanese yen-funded long bets on the local currency.

It hit a record low of 83.9725 last week and would have weakened further if not for the Reserve Bank of India’s (RBI) intervention.

Meanwhile, dollar-rupee forward premiums jumped with the 1-year implied yield touching a 15-month peak of 2.10%, up 6 basis points from the previous session.