The Indian rupee on Wednesday erased all the morning losses and strengthened against the US dollar after wholesale price index (WPI) inflation rose slower than estimates.

At 2.10pm, the home currency was trading at 66.85 per dollar, up 0.12% from its previous close of 66.92. The rupee opened at 66.99 per dollar and touched a low of 67.04, a level last seen on 1 September.

India’s WPI rose to a two-year high of 3.74% in August, a level last seen in August 2014, as compared to the estimate of 4% by a Bloomberg analyst poll. WPI was at 3.55% in July.

On Monday, government data showed that retail inflation decelerated sharply to 5.05% in August, while the Index of Industrial Production (IIP) contracted by 2.4% in July, the lowest in eight months. Together these numbers make a case for another rate cut.

India’s benchmark Sensex index fell 0.02% or 8.78 points to 28,344.76. So far this year, it has gained 9%.

The 10-year bond yield stood at 6.868% against its Monday’s close of 6.848%.

Yield on 6.97% 2026 bond, which is the new 10-year debt, was trading at 6.862% from its Monday close of 6.851%. Bond yields and prices move in opposite directions.

The rupee is down 1.29% till date this year, while foreign institutional investors have bought $6.40 billion in equity and sold $609.50 million in debt markets.

Asian currencies weakened as investors continued sell-off in global stocks and bonds with uncertainty rising over the upcoming policy meetings by the Bank of Japan and US Federal Reserve. Bank of Japan will meet on 21 September and the Fed policy review will be held on 20-21 September.

Japanese yen was down 0.72%, South Korean won 0.56%, Indonesian rupiah 0.44% and Malaysian ringgit fell 0.39%. However, Philippines peso was up 0.18%, China offshore 0.17% and Thai baht gained 0.09%

The dollar index, which measures the US currency’s strength against major currencies, was trading at 95.582, down 0.05% from its previous close of 95.633.

Sources :livemint.com