MUMBAI, Aug 7 (Reuters) - The Indian rupee strengthened on Monday helped by a decline in U.S. yields, while traders looked for triggers that could take the currency out its current trading range.
The rupee was at 82.7250 to the dollar by 10:40 a.m. IST, up from 82.84 in the previous session. The dollar index weakened on Friday and U.S. yields dropped following lower-than-expected U.S. job additions.
It was likely to be a quiet session for the currency, traders said, with one forex trader with a state-run bank saying it was unlikely that the rupee will move below 82.85 during the day.
There will be demand from oil companies around 82.70, which would potentially limit any upside to the rupee, he added.
The rupee has been in a range of 81.60-82.80 to the dollar for several weeks now, with the Reserve Bank of India (RBI) likely limiting moves outside of that range.
"Currently, the FX market is lacking any dominant theme," said Anindya Banerjee, vice-president for currency and interest research at Kotak Securities. Banerjee expects the rupee to trade in a range of 82-83.10, unless an un-factored risk emerges on the horizon.
U.S. inflation data and the RBI policy decision - both due on Thursday - are key to the rupee's next moves.
An in-line or a softer-than-expected U.S. inflation reading will reinforce expectations of a Federal Reserve pause.
Meanwhile, the RBI is expected to keep rates on hold, but is expected to take a hawkish tone.
"Higher food and crude oil prices, along with uneven rains, warrant caution," ANZ said in a note. "The RBI will likely respond with a more hawkish tone, but the bar for a rate hike is high." (Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee)
