MUMBAI: The Indian rupee rose on Friday and dollar-rupee forward premiums climbed on renewed hopes of a 50-basis-point rate cut by the Federal Reserve next week, which also helped lift most Asian currencies.
The rupee was up 0.05% at 83.9250 as of 10:20 a.m. IST, compared with its close at 83.9650 in the previous session.
The currency saw some relief after hovering close to the 84 mark for much of the week. Reports from the Financial Times and the Wall Street Journal signalled that the Fed’s decision next week to cut rates by 25 or 50 bps was likely to be a close call.
US bond yields and the dollar index fell as investors raised the odds of a 50 bp cut to 43%, up from 18% a day earlier, according to CME’s FedWatch tool. Asian currencies rose, with the Korean won, up 0.8%, leading the gains.
The shift also aided dollar-rupee forward premiums, with the 1-year implied yield rising 4 basis points to 2.27%, the highest since May 2023.
Interest in building paid positions on far forwards is likely to continue but would prefer to “pay on dips” at current levels given the rise in recent sessions, a trader at a foreign bank said.
DBS Bank expects the Fed to deliver a 25-bp cut next week but said the US central bank is likely to “be more explicit than its counterparts regarding its multiple rate cut trajectory over 2025-2026”, keeping pressure on the dollar.
Indian rupee ends moderately higher
Despite the positive cues, the rupee will continue to be rangebound as importers’ dollar appetite remains buoyant, traders said. Forex advisory firm IFA global expects the rupee to hover between 83.85 and 84 on Friday.
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