(Reuters) - The Indian rupee hit a one-month low on Wednesday, tracking its Asian peers, while forward premiums eased on worries over the U.S. Federal Reserve's interest rate hike trajectory.
The rupee finished at 82.8025 per dollar, compared with its previous close of 82.7550. It fell up to 82.8975, its weakest level since Jan. 4.
Volumes on the interbank order matching system were around $4.15 billion on Wednesday, their lowest this year, amid a range-bound movement in the currency.
Traders see 82.90-83 as a tough level to breach.
"One can be tempted to sell USD/INR here as the stop loss level is near and well-defined," said Anindya Banerjee, head of research - fx and interest rates at Kotak Securities.
Asian stocks and currencies slid after data showed the U.S. headline consumer inflation index in January rose 6.4% on an annualised basis, higher than economists' expectations of 6.2%.
Fed officials on Tuesday said they would need to keep hiking rates, with the New York Fed President saying rates could even be between 5.0%-5.50% by the end of the year.
"The debate is between one 25-bps or two 25-bps hikes before the Fed is done. However, the U.S. retail sales data (due later in the day) may have an additional impact on U.S. bond yields and the dollar," Kotak's Banerjee added.
Money markets have fully priced in a 25 basis points (bps) hike by the Fed in March and are almost certain of one more in May.
Chances of a 25-bps hike at the June meeting have also increased to 46% from 6.2% a month ago, CME FedWatch tool showed.
The dollar index climbed, taking support from elevated U.S. yields.
USD/INR forward premiums slipped, with the 1-year implied yield touching a six-week low of 2.06%. Traders cited absence of public sector banks as also a reason for their decline.
Meanwhile, India's merchandise trade deficit in January hit its lowest in a year at $17.75 billion as imports declined.
