Indian rupee inches towards record low on yuan weakness - Reuters

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MUMBAI, Aug 22 (Reuters) - The Indian rupee was trading lower versus the dollar on Monday as China's yuan led a broader decline in Asian currencies on concerns over the Federal Reserve's rate hike path.

The rupee was trading at 79.86 per U.S. dollar by 0542 GMT, down from 79.7750 in the previous session, edging closer to its Jul.19 record low of 80.0650.

The dollar index on Monday reached 108.285, the highest since July 15. The offshore Chinese yuan dropped to 6.8518 to the dollar, the lowest in nearly two years, after China cut its benchmark lending rate and lowered the mortgage reference by a bigger margin, adding to last week's easing measures.

"The global backdrop remains conducive for USD/INR to aim for fresh all-time high over this week," said Anindya Banerjee, head of research for forex and interest rates at Kotak Securities.

As long as the dollar index remains strong and the yuan under pressure, USD/INR will threaten 80 levels, Banerjee said.

Expectations that the Fed will keep hiking rates and U.S. rates will stay high for long are supporting the dollar and lifting Treasury yields. Fed officials have signalled that the U.S. central bank was committed to raising rates as high as necessary to tame inflation. The bets that the Fed could turn dovish later next year have had to be scaled back.

In line with broadly hawkish comments from officials recently, Richmond Fed President Thomas Barkin said on Friday the "urge" among central bankers was towards faster, front-loaded rate increases.

Investors are now turning focus to comments of Fed Chair Jerome Powell when he addresses an annual global central banking conference in Jackson Hole, Wyoming, on Friday.

Indian shares, tracking decline in Asian shares and U.S. equity futures, dropped. The BSE Sensex (.BSESN) was down more than 1%, adding to Friday's decline.

USD/INR forward premiums were slightly higher. Oil prices declined 1.3%.

Reporting by Nimesh Vora Editing by Dhanya Ann Thoppil

Our Standards: The Thomson Reuters Trust Principles.

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