The dollar index rose 0.3% to 104.2, while Asian currencies weakened, with the Thai baht and Philippine peso down 0.5% each.
The rupee was contained in a tight band through much of the day’s session but the local unit slipped towards the close of the session amid an uptick in the dollar index, a foreign exchange trader at a private bank said.
In the near term, the rupee is expected to consolidate in its prevailing range between 82.80 and 83.15, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities
Meanwhile, dollar-rupee forward premiums fell with the one-year implied yield dropping 3 basis points (bps) to 1.64%, its lowest level in over two-and-a-half months.
The one-year implied yield is down 22 bps in February so far, pressured by paring of rate cut expectations from the Federal Reserve and improvement in rupee liquidity conditions, traders said.
A pullback in rate cut bets has also boosted U.S. bond yields, with the 10-year and two-year Treasury yield up 33 bps and 46 bps, respectively, in February so far.
Investors now await the release of revised U.S. GDP data for the October-December quarter and remarks from Fed officials, due later in the day, which may offer cues about policymakers’ thinking about the future trajectory of policy rates.
Investors are currently pricing in a 63% chance of a rate cut at the Fed’s June policy meeting, down from 73% a week earlier, according to the CME’s FedWatch tool.
(Reporting by Jaspreet Kalra; Editing by Sohini Goswami)
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