By Nimesh Vora
MUMBAI, July 26 (Reuters) - The Indian rupee declined on Wednesday, amid position adjustments and hedging by importers before the U.S. Federal Reserve's interest rate decision.
The rupee was at 82.00 to the U.S. dollar by 10:50 a.m. IST, down from 81.87 in the previous session. The local currency had opened at 81.8850.
The bid on the USD/INR pair following the open is likely from speculators who are trimming short positions and from importers, a currency trader at a bank said.
"That is to be expected after what happened yesterday."
The Reserve Bank of India (RBI) likely intervened on Tuesday when rupee rose to near 81.70, in a repeat of what it has done in the past. The RBI, for now at least, does not seem inclined to allow rupee to go past that level, according to traders.
The central bank's persistent intervention has pushed India's forex reserve back above $600 billion.
Asian currencies dropped before a certain Fed rate hike, which investors reckon will likely be the last. A fall in the U.S. inflation rate has fuelled expectations that the Fed had reached the terminal rate.
The Fed's last dot plot, however, suggested that another rate hike after July was likely.
"The dilemma (at this week's meeting) is whether the Fed hikes 25 bps and sticks with the view that it needs to signal the likely need for one or more rate hikes or whether it moves more to a data dependency stance," ING Bank said in a note.
The rupee forward premiums dropped, with the 1-year implied yield at 1.71%. Premiums had moved higher on Tuesday on likely sell/buy swaps by the RBI to sterilize the spot intervention. (Reporting by Nimesh Vora; Editing by Varun H K)