Rupee marches to new 1-month high, importers advised to hedge

the rupee It reached an all-time high against the dollar on Monday, supported by declining Treasury yields and positive risk sentiment.

The rupee was at 81.8075 to the dollar at 11:02 a.m. IST, up from 81.9650 in the previous session. It managed to climb to 81.7275, which is the highest level in more than a month.

Importers are advised to participate near the level of 81.70 to hedge their payments in dollars, said Amit Babari, Managing Director of CR Forex.

Papari added that hedging issuers should wait for USD/INR to reach around 82.20.

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The rupee managed to move out of its narrow 82.40-83.00 range last week, climbing above 82 on the back of one-off dollar inflows. Analysts said the rupee’s rally was not entirely unexpected, given its past behavior and the RBI’s defense at the 83 level.

“The USD/INR has always been exotic. The narrower it is traded for a longer period of time, the greater the certainty of a single rupee move,” said Kunal Sudani, vice president of Shinhan Bank.

“That’s exactly what happened. The Reserve Bank of India seemed to defend the 83.00 levels and after that, the rupee rally was supported by the inflow of foreign money.”

On Monday, the rupee and other Asian currencies helped lower US yields. The 10-year Treasury yield fell below 4% and the 2-year Treasury yield was 10 basis points below its recent highs.

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This helped lift risk sentiment as Asian stock indices opened the week on a positive note.

Investors will be watching two key developments this week for clues about US interest rates – Federal Reserve Chair Jerome Powell’s testimony to lawmakers on Tuesday and Wednesday and the US jobs report on Friday.

The previous jobs report had canceled out the current reassessment of the peak federal funds rate.