By Nimesh Vora
MUMBAI, May 13 (Reuters) – The Indian rupee might open marginally higher on Wednesday, supported by a hike in import duties on gold and silver, though oil prices and a rise in U.S. inflation are expected to limit upside.
The rupee is expected to open in the 95.58-95.62 range, traders said, after settling at 95.6275 on Tuesday.
India hiked import tariffs on gold and silver to 15% from 6% to rein in purchases and support the rupee, which has been pressured by a spike in oil prices amid the Iran war.
The increases are likely to curb demand, help narrow a trade deficit set to widen due to higher oil prices, and offer slight relief to the rupee, which has dropped by over 5% since the Iran war began. India is the world’s second-largest consumer of precious metals.
The step followed India’s Prime Minister Narendra Modi, urging citizens to avoid gold purchases for a year to help protect foreign exchange reserves.
After Modi’s speech and recent reports suggesting steps to support the rupee, some form of measures were expected, a currency trader at a bank said.
The impact of the hike will “understandably be muted” when you factor in high oil prices and rising U.S. yields, he said
Moreover, the measure itself appears “somewhat underwhelming”, he added.
US INFLATION COMPOUNDS PRESSURE
U.S. consumer inflation rose further in April, with the annual rate posting its largest increase in three years. US headline inflation rose to 3.8% year-on-year, driven by the surge in energy costs.
Following the data, investors priced out the possibility of a Federal Reserve rate cut through December 2027, while the 10-year U.S. Treasury yield climbed to 4.47%.
Meanwhile, Brent crude hovered near $107, with investors awaiting developments on the fragile ceasefire in the Iran war, while U.S. President Donald Trump headed to China for a high-stakes summit with President Xi Jinping.
(Reporting by Nimesh Vora; Editing by Rashmi Aich)