Rupee logs best day in three weeks on rising bets of Fed pause

The Indian rupee saw its best trading session in three weeks on Thursday, as Asian currencies confirmed their anticipation US Federal Reserve It was near the end of the price hike cycle.

The rupee ended at 82.2625 per dollar, compared to its previous close of 82.6550.

Traders said lack of inflows and potential dollar demand from oil companies had caused the rupee to slide from its intraday high of 82.08.

Also read: Weekly Rupee View: Rupee is looking up

The rupee joined peers such as the Chinese yuan and the Thai baht, which rose about 0.5%, as the dollar index fell to a seven-week low and briefly fell below the 102 level.

The Fed raised interest rates overnight by 25 basis points and softened its hawkish stance by hinting it was about to pause after the recent collapse of two US banks.

Although the central bank kept the door open for another increase but did not see any interest rate cuts this year, the probability of stalling at the May meeting was roughly equal to a 25 basis point hike, along with a 70 basis point rate cut in 2023.

Kunal Kourani, associate vice president at Meclay Financial, said there was still a lot of skepticism because the battle against inflation in the US was not won.

“In the event of the next US inflation printing surprises on the upside, market prices could change dramatically as rally will come back to the table.”

Traders said that in the near term, the dollar appears to be under pressure due to a combination of the Federal Reserve’s expectations, the banking crisis, as well as the strength of the euro and the pound sterling.

The Bank of England meets later in the day and is expected to raise interest rates for the 11th consecutive time after a surprise jump in inflation, while a member of the European Central Bank’s Governing Council said more increases may be needed.