The rupee was trading around 81.96 to the dollar by 10:41 am IST, compared to 82.0775 in the previous session, according to Reuters.
The US Consumer Price Index (CPI) rose 0.1% last month after rising 0.4% in February.
Economists polled by Reuters had expected the consumer price index to rise 0.2 percent in March.
However, the core CPI remained elevated, which analysts warned could be a cause for concern.
Moreover, minutes from the Fed’s March meeting revealed members’ concerns about a banking crisis, with staff forecasting a mild recession later this year.
This sent the dollar index down 0.6% overnight, while US bond yields fell in anticipation of the Fed’s interest rate cuts.
Futures showed that expectations for a 25 basis point hike from the Fed next month were close to 71%, with that likely to be the last hike before the rate cuts from July onwards.
A trader at a state-run bank said the rupee’s intraday gains could be capped by mixed signals and higher crude prices.
Brent crude futures jumped to more than $87 a barrel overnight, near 2023 highs.
Asian currencies strengthened, while stocks fell as technology stocks sold off in Hong Kong.
Markets await Friday’s US retail sales data to see how consumer spending will be affected by higher prices.
NAA