The Indian rupee struggled for direction on Wednesday, as comfort from a broadly weaker dollar and modest inflows proved transient in the face of strong demand for the greenback from state-run banks and weakness in the Chinese yuan.

Analysts at the financial giant Goldman Sachs reportedly think the onshore Chinese yuan (CNY) will rise against the dollar over the next 12 months.

The People’s Bank of China on Tuesday elevated its reference rate for the Chinese yuan to surpass the key threshold of 7.2 per dollar for the first time since early April.

The dollar retreated on Tuesday, giving back some of its sharp gains a day earlier after an inflation reading came in below market expectations.

With both China and the US reporting ‘progress’ in their first trade talks, the offshore yuan had strengthened to 7.22 per US dollar by Monday.

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The U.S. Federal Reserve has adopted a wait-and-see stance on the economic fallout from Trump's tariff campaign before cutting interest rates again. Traders currently price in about 50 basis points of rate reductions between now and the end of the year, according to LSEG data, with the next quarter-point cut seen in September.

Goldman Sachs predicts a weaker U.S. dollar against Asian currencies, driven by policy shifts and yuan strength.

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SHANGHAI: China’s yuan jumped to a six-month high against the dollar on Tuesday, breaching a key threshold, after Beijing and Washington agreed to pause their trade war while the central bank also lent support through its official guidance rate.