The Indian rupee ended 7 paise higher against the US dollar on Thursday led by broader weakness in the greenback and a drop in treasury yields after the US Federal Reserve delivered a dovish hold on policy rates. The local currency ended at 83.33 a dollar, up by 0.08% compared to its previous close of 83.40.
The US dollar index, which measures the greenback against a basket of currencies, fell 0.32% to 102.54. The yield on 10-year US Treasuries fell below 4% for the first time since August. The 10-year yield fell to 3.93%, its weakest level since July.
Strong gains in domestic equities amid foreign capital inflows supported the rupee, however, local dollar demand and spike in crude oil prices kept a check on the upside.
Also Read: Stock market today: Rupee gains, bond yields drop after dovish US Federal Reserve
“The rupee should have gained further… but right now it seems stuck between 83.25 and 83.40,” a foreign exchange trader at a state-run bank told Reuters.
The US dollar and the treasuries yields declined after the Fed signaled that the interest-rate hike cycle has come to an end while forecasting lower borrowing costs in 2024.
The US Fed Chair Jerome Powell-led Federal Open Market Committee (FOMC) kept the benchmark lending rate unchanged for a third time in a row and signaled that the interest rate hike cycle is over.
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It also cut the median projection for interest rates at the end of 2024 to the midpoint between 4.50% and 4.75%, signaling they now expect 75 basis points (bps) of cuts from the current levels next year.
Meanwhile, India’s wholesale price index (WPI) inflation for November rose to 0.26% from negative (-)0.52% in October, coming back in positive territory after seven months.
Crude oil prices traded higher, pressurizing the local currency.
Brent crude futures rose 2.02% to $75.76 a barrel, while the US West Texas Intermediate (WTI) crude futures gained 0.99% to $70.85.
On the domestic front, the Indian stock market indices ended at record closing high led by upbeat investors sentiment after the dovish US Fed policy.
The Sensex ended 929.60 points, or 1.34%, higher at 70,514.20, while the Nifty 50 surged 256.35 points, or 1.23%, to settle at 21,182.70.
On Wednesday, the Foreign institutional investors (FIIs) net bought Indian shares worth ₹4,710.86 crore, while Domestic Institutional Investors (DIIs) net sold shares to the tune of ₹958.49 crore, as per provisional data available on the exchanges.
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