Indian rupee flat amid weak risk sentiment

Indian rupee flat amid weak risk sentiment

MUMBAI, Aug 23 (Reuters) - The Indian rupee was trading little changed to the dollar on Tuesday, hovering just under the psychological 80 level, amid rising concerns about the deteriorating global risk mood.

The rupee INR=D3 was trading at 79.8800 at 0530 GMT, barely changed from 79.8675 in the previous session. The local unit opened at 79.83 and has so far traded in an about 7 paisa range.

The rupee in recent sessions has struggled in the backdrop of a resurgent dollar and risk aversion, and analysts reckon that the local currency could come under more pressure.

"The rupee is very vulnerable now as a potential wave of risk aversion can be triggered if the next (U.S.) inflation print is worse than expected," said Srinivas Puni, managing director at forex advisory firm QuantArt Market Solutions.

"Persistent fall in equities is the factor to watch out for."

Major Asian equity gauges extended losses on Tuesday, a day after the S&P 500 index suffered it worst drawdown in two months as investors worried about slowing growth outlook and rate increases.

The U.S. benchmark index tumbled more than 2% on Monday.

Fed fund futures are assigning a more than 50% probability that the U.S. central bank will hike rates by 75 basis points for the third straight time in September to quell inflation.

The dollar index =USD briefly climbed above 109 on Monday, supported by the equity selloff and hawkish Fed expectations. The index since the beginning of last week is up more than 3%.

The BSE Sensex .BSESN on Tuesday fell to its lowest level in over two weeks. The gauge slipped 1.4% in the previous session. According to preliminary BSE data, foreign investors were net sellers of 4.5 billion rupees ($56.34 million) of Indian shares on Monday. ($1 = 79.8660 Indian rupees)
Reporting by Nimesh Vora Editing by Dhanya Ann Thoppil