MUMBAI: The Indian rupee rose early on Thursday on back of overnight losses on the dollar index, but was hindered by an established resistance level, traders said.
The rupee traded at 81.9475 to the U.S. dollar by 10:50 a.m. IST, up from 82.0375 in the previous session. The local currency reached a high of 81.9050.
The USD/INR pair, like in recent session, is finding support around the 81.90 level, a spot FX trader said.
Indian rupee to nudge higher at open, avoiding losses in Asian peers
“Difficult to talk about momentum in this kind of a market, but reckon we need a move below last Friday’s low of 81.85.”
The rupee was helped by the overnight fall on the dollar index, which fell to near-102 following U.S. Federal Reserve Chair Jerome Powell’s testimony.
Powell signalled that more rate hikes were needed to fight inflation, a message the Fed’s dot plot last week had telegraphed already.
“Powell’s speech offered little new information to traders, resulting in the selling of the dollar index,” and the move lower on USD/INR, Anindya Banerjee, head research - FX and interest rates at Kotak Securities, said.
For Indian corporates having an exposure to the British pound, the Bank of England’s (BoE) decision later in the day will be heavily scrutinized.
Following the higher-than-expected May inflation print, traders are divided on whether the BoE will opt for a 25 basis points (bps) hike or a 50 bps increase.
USD/GBP was hovering near 1.2750 while GBP/INR was at 104.50.
“For GBP, potentially a few scenarios may play out: A 25 bps hike and lack of hawkish communication should see GBP fall post-decision, while a 50 bps hike can perhaps see GBP overshoot to the upside,” OCBC Treasury Research said in a note.
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