MUMBAI, Jan 18 (Reuters) - The Indian rupee was rangebound against the U.S. dollar on Wednesday following the Japanese yen-led decline in Asian currencies after the Bank of Japan stuck to its ultra-easy monetary policy.
The rupee was trading at 81.77 to the dollar by 10:00 a.m. IST, barely changed from 81.76 in the previous session. The local currency had opened little changed.
"Overnight, the USD/INR touched a low of 81.55 in the spot reference offshore, but the surge in USD/JPY post-BOJ enabled a flat open in USD/INR," said Anindya Banerjee, head of research - fx and interest rates at Kotak Securities.
"The USD/INR may attempt a break above 81.90 today. If it is successful, then we can see a short-covering rally. How powerful the rally will be depends on how significantly large at the stops above 81.90 resistance."
The yen plunged 2.5% to the dollar to 131.50 after the BoJ maintained ultra-low interest rates, disappointing some investors who had hoped the central bank would tweak its yield curve control policy further.
Alongside the yen, the Chinese yuan and the Korean won were down at least 0.3% each. The dollar index rose to 102.86. Japanese shares jumped following the BoJ announcement but the impact on other Asian gauges was limited.
Japanese yields plunged, pushing the 10-year U.S. yield back below 3.50%.
The focus now turns to the U.S. Federal Reserve policy decision due in two weeks, at which it is expected to further dial back the size of rate hikes, with futures pricing in a peak rate of around 5%.
The rupee forward premiums were slightly lower, while the JPY/INR cross rate was headed for its biggest decline since March 2020. (Reporting by Nimesh Vora; Editing by Savio D'Souza)
