The Indian rupee rose on Thursday, tracking its Asian peers after the US Federal Reserve kept its rate projections for 2024 unchanged, prompting investors to raise bets on the possibility of the first rate cut coming in June.
The rupee was at 22.6478 against the UAE dirham as of 8.35am UAE time, higher by 0.05 per cent from its close of 22.6587 in the previous session.
The currency had dropped to a two-month low on Wednesday due to dollar demand from importers, including local oil companies.
The dollar index was little changed at 103.2, after dropping 0.5 per cent on Wednesday. Most Asian currencies rose on Thursday, led by the Korean won’s 1.1 per cent jump.
The Fed’s fresh dot plot indicated policymakers expect three rate cuts this year, unchanged from their forecast in December. That lifted the odds of rate cuts starting in June to nearly 75 per cent from about 59 per cent a day earlier, according to CME’s FedWatch tool.
US bond yields fell after the Fed’s decision, with the 2-year yield last quoted at 4.58 per cent in Asia trading, down 12 basis points from its close on Tuesday. The 10-year yield also edged lower and was last quoted at 4.25 per cent.
“Soft US yields are likely to lift the rupee … but corporate dollar outflows before the financial year-end may exert downward pressure,” said Arnob Biswas, head of foreign exchange research at SMC Global Securities.
Meanwhile, dollar-rupee forward premiums rose with the 1-year implied yield up 3 basis points at 1.64 per cent, aided by the higher odds of a Fed rate cut in June.
The bias on both the rupee and forward premiums is tilted higher for the day, a foreign exchange trader at a state-run bank said. But the key is if local dollar demand continues to curb the rupee’s gains, the trader added.