By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee strengthened on Thursday tracking an uptick in most of its Asian peers, which were likely aided by drop in U.S. Treasury yields following the Federal Reserve’s policy decision.
The rupee was at 82.9850 against the U.S. dollar as of 10:00 a.m. IST, up 0.07% compared to its previous close at 83.0425.
The dollar index was largely steady near 103.5 while most Asian currencies inched up, with the Korean won leading gains.
The rupee’s rise could be capped near 82.90 amid dip-buying interest (on the dollar-rupee pair) from local oil companies and state-run banks, a foreign exchange trader at a private bank said.
Focus will be on the presentation of India’s interim federal budget, due at 11:00 a.m. IST, with investors keeping a keen eye on metrics such as the government’s fiscal deficit and capital expenditure plans.
The reactions in domestic equities could be a key driver of rupee volatility on Thursday, Arnob Biswas, head of foreign exchange research at SMC Global Securities said.
While the Fed expectedly kept rates unchanged on Wednesday, Chair Jerome Powell explicitly pushed back against a March rate cut, but noted that interest rates had peaked and could move lower later in the year.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said.
The odds of a March rate shrunk to 35% after Powell’s remarks, with investors raising bets on a rate cut in May to slightly above 92%, according to the CME FedWatch tool.
The 10-year U.S. Treasury yield last quoted lower in Asia hours at 3.93% after falling 9 basis point on Wednesday.
(Reporting by Jaspreet Kalra; Editing by Varun H K)
