By Jaspreet Kalra
MUMBAI, July 25 (Reuters) - The Indian rupee declined to its weakest level in a month in early trading on Friday, pressured by a fall in local equities as well as investors cutting their very near-tenor bullish bets on the currency, traders said.
The rupee INR=IN fell to 86.5775, its lowest level since June 23, before paring losses to last quote at 86.51, down 0.1% on the day as of 10:10 a.m. IST.
India's benchmark equity indexes, the BSE Sensex .BSESN and Nifty 50 .NSEI fell about 0.5% each, dragged by losses in Bajaj Finance due to asset quality concerns.
Regional equities and currencies were mostly lower as well with the offshore Chinese yuan, a closely tracked peer of the rupee, down 0.2%.
Interbank was holding onto modest long positions on the rupee overnight, which were cut in early trading, pushing the currency lower, a trader at a private bank said.
In the near-term, expectations are that the rupee could go "another leg lower," to 86.80 before reversing course.
Investors and traders are also hunkering down for a week likely to be dominated by news flow surrounding the August 1 U.S. tariff deadline, policy decisions by the Federal Reserve and the Bank of Japan, alongside key U.S. data prints.
For the dollar, "what seemed like a new uptrend to start the month has nearly all but unwound. Lot of event risk next week, before the market switches into August-mode," BofA Global Research said in a note.
The dollar index is on course to end the week down by about 1% after rising over the last two weeks and was last quoted at 97.6.
Meanwhile, analysts polled by Reuters expect the Reserve Bank of India to keep policy rates unchanged in August but note that the central bank is likely to lower it again by year-end.
Almost half of the polled analysts forecast that interest rates would be lower than previous forecasts at the year-end as falling inflation has prompted calls for at least one more rate cut this year.
(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)
((jaspreet.kalra@thomsonreuters.com))
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