MUMBAI, July 12 Reuters The Indian rupee was marginally higher on Friday after a soft U.S. inflation reading boosted hopes of rate cuts by the Federal Reserve and drove U.S. bond yields lower which also helped lift dollarrupee forward premiums.

The rupee was at 83.5275 against the U.S. dollar as of 1005 a.m. IST, moderately stronger than its previous close at 83.56.

The dollar index was up 0.1 in Asia trading after slumping to a onemonth low of 104.07 on Thursday as data showed that headline U.S. consumer prices unexpectedly fell in June, while the core monthonmonth consumer price index CPI stood at 0.1.

Odds of a September rate cut by the Fed rose above 90 after the data, according to the CME39;s FedWatch tool, driving U.S. bond yields lower as well.

There are decent offers present on USDINR but, as usual, there seems to be sufficient dipbuying interest, a foreign exchange trader at a staterun bank said.

Meanwhile, dollarrupee forward premiums ticked up with the 1year implied yield up 2 basis points at 1.68, its highest in little over a month.

The 1year U.S. Treasury yield fell to its lowest since early March at 4.89 on Thursday before nudging up in Asia hours.

The rupee keeps oscillating around 83.50 levels with an overall downside bias, led by a softer dollar and chunky inflows in the domestic market and waiting for the RBI to loosen its grip and let the currency appreciate, said Amit Pabari, managing director at FX advisory firm CR Forex.

The Reserve Bank of…