INDIA RUPEE Rupee below 82/USD for first time in a month, premiums at 12-yr low

A cashier displays the new 2000 Indian rupee banknotes inside a bank in Jammu
A cashier displays the new 2000 Indian rupee banknotes inside a bank in Jammu, November 15, 2016. REUTERS/Mukesh Gupta

MUMBAI, Dec 6 (Reuters) - The Indian rupee fell below 82 to the U.S. currency for the first time in over a month on Tuesday, likely due to stop losses and dividend payment-related outflows.

The rupee was at 82.2550 to the dollar at 10:58 a.m. IST, down from 81.79 in the previous session. The local unit dropped to a low of 82.34, a level last seen on Nov. 4.

USD/INR short squeeze at 82.00-82.10, a level that most traders thought was safe, is helping the dollar, a trader who did not wish to be identified said.

Talk of a mining company's large dividend payment-related dollar outflow was adding to the USD/INR upside momentum, they added.

The rupee and other Asian currencies were pressured by the upbeat U.S. services data that raised fears of the Federal Reserve pushing rates higher than what is currently priced in.

U.S. services industry activity unexpectedly picked up in November. The Institute for Supply Management (ISM) said on Monday its non-manufacturing PMI (Purchasing Managers' Index) increased to 56.5 last month from 54.4 in October.

Futures currently show that traders expect the Fed rate to peak at around 5% mid-next year. That could be revisited if U.S. data continues to surprise positively.

Meanwhile, USD/INR forward premiums fell more to slip to their lowest level in more than a decade. The 1-year implied yield dropped to near 1.70%, helped by the overnight increase in Treasury yields following the U.S. services data.

Focus is now on the Reserve Bank of India's policy decision, due on Wednesday. The RBI will raise interest rates by a smaller 35 basis points to 6.25%, according to economists polled by Reuters.

Reporting by Nimesh Vora; Editing by Janane Venkatraman

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