Rupee rises on broad dollar decline; Premiums increase slightly

The Indian rupee traded higher against the US currency on Tuesday, following a rise in its Asian counterparts.

The rupee was trading at 82.3600 against the dollar as of 10:30 IST versus 82.5650 in the previous session.

“We expect speculators to liquidate their long (dollar) positions built up last week and exporters to join for hedging purposes,” said Anindya Banerjee, head of research – FX and interest rates at Kotak Securities.

Unless the Reserve Bank of India takes aggressive action to buy dollars, there is a “high probability” that the rupee will rise to around 82.15-82.20 immediately,” Banerjee said.

The Korean won propelled Asian currencies higher, while risk appetite increased in the region on a fall in the dollar index.

The dollar index fell to a two-month low of 101.73 in Asian trading on Tuesday, extending Monday’s decline. The drop in the dollar index was largely due to a fall in US yields.

The US two-year yield fell to 4.8515% ahead of US inflation data expected on Wednesday, down from a recent peak of 5.12%. The 10-year yield also fell below 4% in Asian trading on Tuesday.

Investors assessed comments from the Federal Reserve on Monday, which suggested that further rate hikes were needed to bring down still-high inflation but that the end of the Federal Reserve’s current monetary tightening cycle was nearing.

Traders are expecting the Fed to hike rates by 25 basis points (bps) this month, but the prospect of further hikes is uncertain.

As US yields fell, premiums on rupee long-distance futures rose. The dollar’s one-year forward implied yield against the rupee rose three basis points to 1.64%.

Related Articles

Back to top button