Mumbai: The Indian rupee on Wednesday erased most of the losses and was trading little changed against the US dollar, ahead of the key inflation and index of industrial production (IIP) data on Thursday.

At 2pm, the home currency was trading at 66.67, up 0.01% from its previous close of 66.68. The rupee opened at 66.83 a dollar and touched a low of 66.84, a level last seen on 26 April.

The government will issue Consumer Price Index (CPI) and IIP data on 12 May after 5.30pm. According to Bloomberg estimates, CPI will be at 5.05% for April against 4.83% in March. The IIP will be at 2.5% in March as compared to 2% in February.

In morning trade, the rupee fell as much as 0.24% on India-Mauritius tax issue.

India will shut the door on investors using Mauritius and Singapore to avoid paying taxes in India, starting in the next financial year, in order to curb tax evasion, in a move that could also impact capital inflows. India will get the right to tax capital gains on investments channelled through Mauritius under an amended tax treaty it signed with the island republic on 10 May in Port Louis, Mint reported.

The amendment to the 1983 India-Mauritius treaty, which will come into force on 1 April 2017, will also apply to the India-Singapore treaty, shutting two lucrative investment routes preferred by foreign investors. The India-Singapore treaty links the capital gains tax regime to that provided in the India-Mauritius treaty, the report added.

The changes will have an impact on foreign investors who route their investments from these two countries to avoid paying capital gains tax in India.

“This government is serious about tax reforms and clarity to address the ease of doing business. Yes it would push tax costs for investors but there is certainty and clarity. India in the medium to long term will contribute to attract acting investments, and a stable environment will augur well for the India rupee which would make the tax cost look insignificant,” said Mukesh Butani, managing partner of BMR legal.

India’s benchmark Sensex index fell 0.79% or 204.04 points to 25,568.49. So far this year, Sensex is down 2.1%.

India’s 10-year bond yield was trading at 7.427%, as compared with its Tuesday’s close of 7.427%.

So far this year, the rupee has weakened 0.83%, while foreign institutional investors have bought $1.76 billion from the local equity market and sold $42.90 million in debt markets.

Asian currencies were trading mixed. Japanese yen was up 0.55%, South Korean won 0.46%, Philippines peso 0.42%, Malaysian ringgit 0.16% and China renminbi 0.14%. However, Indonesian rupiah was down 0.18%, Thai baht 0.13%, Singapore dollar 0.1% and Taiwan dollar 0.05%.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 94.09, down 0.22% from its previous close of 94.29.

Source:livemint.com