MUMBAI, Feb 23 (Reuters) - The Indian rupee struggled to build on its upward momentum on Friday, on dollar demand from oil companies and other importers, and the Federal Reserve's wariness over cutting interest rates early.
The rupee was at 82.8675 to the U.S. dollar at 10:22 a.m. IST compared with 82.84 in the previous session. The local currency on Thursday had its best day this year, thanks to inflows.
Persistent comments from Fed officials about keeping the policy rate higher are likely to cap any substantial upside in the rupee, Arnob Biswas, head of foreign exchange research at SMC Securities, said.
He pointed out that the first Fed cut is now likely only in June, according to Fed funds futures.
A March U.S. rate cut has been fully priced out while odds of a reduction in May are less than 25%.
Policymakers should delay interest rate cuts by at least another couple more months to see if a recent uptick in inflation signals stalling progress toward price stability or is just a bump in the road, Fed Governor Christopher Waller said on Thursday.
The two-year U.S. Treasury yield climbed to the highest level since mid-December.
Besides higher U.S. yields, the "other impediment" for the rupee to move higher from here are oil companies and the Reserve Bank of India (RBI), a FX trader at a bank said.
Oil companies "always seem to come in" when USD/INR "has a decent dip" and the RBI "anyway will most likely step in", he said.
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
