MUMBAI, April 12 (Reuters) - The Indian rupee weakened on Friday, tracking a fall in its Asian peers, while dollar-rupee forward premiums also declined as U.S. bond yields rose amid expectations that the Federal Reserve may delay rate cuts.
The rupee was at 83.3950 against the U.S. dollar as of 10:20 a.m. IST, weaker by 0.2% compared with its close at 83.1850 on Wednesday. Indian financial markets were shut on Thursday for a local holiday.
The rupee, alongside most of its Asian peers, was under pressure after U.S. inflation for March came in hotter than expected, sparking a rally in the dollar index and U.S. bond yields.
The dollar index rose to a near five-month high of 105.53 on Thursday, while the 10-year U.S. Treasury yield was at 4.57%, hovering close to its highest level since mid-November.
Odds of a Fed rate cut in June have declined to about 24%, down from about 66% a week earlier, according to the CME's FedWatch tool.
Dollar bids from foreign banks also pushed the rupee lower in early trading, a foreign exchange trader at a state-run bank said.
The rupee is unlikely to fall much from here as traders remain wary of the Reserve Bank of India stepping in to curb losses near these levels, the trader added.
Most Asian currencies weakened with the Korean won down 0.7% and leading losses.
"The rupee faces some short-term hurdles, but the downside will be limited," Amit Pabari, managing director at FX advisory firm CR Forex, said.
Meanwhile, dollar-rupee forward premiums declined with the 1-year implied yield down 3 bps at 1.63%, pressured by elevated near-maturity U.S. bond yields.
India's inflation data due later in the day is expected to show that inflation likely eased to a five-month low of 4.91% in March from 5.09% in February, according to a Reuters poll. (Reporting by Jaspreet Kalra; Editing by Sohini Goswami)
