Rupee seen lower as growth concerns fuel risk aversion

MUMBAI (Reuters) - The Indian rupee is expected to decline against the U.S. dollar at the open on Friday as growth concerns prompted by weak U.S. data and rate hikes by major central prompted investors to exit risk assets.

The rupee is likely to open at around 82.85 to the dollar, compared with 82.76 in the previous session.

After the opening moves lower on the rupee, there will "understandable hesitancy" among traders with the psychological level of 83 nearby, a trader at a Mumbai-based bank said.

It will "take a lot" for the rupee to fall below 83 towards a record low, the trader said.

The European Central Bank slowed its pace of interest rate hikes to 50 basis points but took a hawkish stance on monetary policy on Thursday, a day after the U.S. Federal Reserve signalled rates could rise more than what markets had priced in.

ECB policymakers reckoned rates will still have to rise significantly at a steady pace. ECB President Christine Lagarde said increments of 50 bps for a period of time looked about right.

The Bank of England raised its key rate by a further half-percentage point on Thursday and indicated more hikes were likely.

While central banks continue to hike rates to counter the inflation threat, data signalled an economic slowdown.

U.S. November retail sales declined more than expected and production at U.S. factories dropped more than what economists had forecast.

The S&P 500 index sank 2.5% on Thursday, while European equities plunged 3.5%. The dollar index rose by the most in about three weeks on safe haven demand.

Meanwhile, India's trade deficit narrowed to $23.9 billion in November from $26.9 billion in the previous month, helped by modest growth in exports.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 82.94; onshore one-month forward premium at 13.5 paise

** USD/INR NSE Dec futures settled on Thu at 82.79

** USD/INR Dec forward premium at 4.0 paise

** Dollar index at 104.22

** Brent crude futures up 0.5% at $81.6 per barrel

** Ten-year U.S. note yield at 3.48%

** SGX Nifty nearest-month futures down 0.3% at 18,410

** As per NSDL data, foreign investors bought a net $40.2 million worth of Indian shares on Dec. 15

** NSDL data shows foreign investors sold a net $25.7 million worth of Indian bonds on Dec. 15

(Reporting by Nimesh Vora; Editing by Savio D'Souza)

By Nimesh Vora