Rupee inches lower, dollar inflows expected to cap downside

Mumbai, March 29 The rupee, after adjusting for the cost of carrying for the financial year, fell against the dollar on Wednesday amid rising US yields and expectations of an influx of dollars.

At 10.20 am, the rupee was at 82.26 to the dollar, compared to 82.1875 in the previous session. The USD/INR spot date has been changed from March 31st to April 3rd, the following fiscal year.

One trader said that there is a higher return in holding short dollar positions to turn and the lower rupee on the open has been adjusted for that.

The higher open should not have “too many legs” with speculators wary of potential dollar inflows

Asian currencies were mixed today amid higher US yields. Fading concerns about the US banking sector prompted traders to reconsider their expectations about the Fed’s rate path.

Expectations about the extent of rate cuts have faded.

At the height of the turmoil, traders priced in more than 200 basis points worth of price cuts, from the peak, by December 2024. That has now fallen to 164 basis points, according to DBS Research.

Moreover, the odds of whether the Fed will choose to hike or pause interest rates at its May meeting are now a toss-up.

The US two-year yield is now off last week’s lows, yet the greenback has not gained against its major peers.

Amit Babari, managing director at CR Forex, said the tepid dollar index despite the rally in US yields suggests that “the undercurrent of safe-haven demand is missing.”