Rupee ends stronger on broad dollar fall; forward premiums inch up

the Indian rupees It ended stronger on Thursday as the dollar index fell to multi-week lows, while rising spot rupee futures premiums helped.

The rupee closed at 81.95 to the dollar, compared to a close of 82.0375 on Wednesday.

Low volatility in the domestic unit makes things very certain for importers and exporters, said Arnob Biswas, head of forex research at SMC Global.

Forward rupee premiums have also risen, Biswas said, helping to maintain positive sentiment towards the currency.

The one-year USD/INR implied yield rose to 1.86%, its highest since May 29, from 1.78% in the previous session.

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Traders said public sector banks are paying.

Jayesh Mehta, managing director and India treasurer at Bank of America, said the rupee is likely to strengthen beyond the 80-per-dollar level in 2024, with the help of foreign inflows.

The dollar index fell to 101.950, the lowest level since May 12, after the testimony of US Federal Reserve Chairman Jerome Powell, in which he said that more interest rate hikes are needed to combat inflation.

ING analysts said in a note that price action in the forex space indicates that investors are losing interest in the strong dollar story and are being reminded to look for opportunities abroad.

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Meanwhile, risk sentiment in equity markets remained weak due to the Fed’s hawkish views.

Markets are now looking forward to a policy decision by the Bank of England and investors are considering the possibility of the central bank raising interest rates higher than expected.

As a result of this, analysts said, interest in GBP/INR is more.