Indian Rupee Rises To 6-Week High After Fed Rate Cut, Importer Dollar Bids Pick Up
Date
9/19/2024 5:12:34 AM
(MENAFN- Khaleej Times)
The Indian rupee rose to its strongest level in over six weeks on Thursday after the federal Reserve kicked off policy easing with a 50-basis-point rate cut, but traders expect importer dollar bids to limit the currency's immediate gains.
The rupee was at 83.66 against the U.S. dollar as of 10:20 a.m. IST, up 0.1% compared to its close at 83.75 in the previous session.
The local currency touched a peak of 83.6650 in early trade, its highest since Aug. 1.
The dollar index initially fell to its year-to-date low after the Fed's rate cut verdict on Wednesday but rebounded to last quote at 101, supported by Chair Jerome Powell's comments that he does not see a risk of recession in the U.S.
The rupee was aided by "broad-based" dollar selling interest on Thursday, but the currency is unlikely to gain above 83.65, a foreign exchange salesperson at a private bank said.
"Importers will be quite willing (to buy dollars) at these levels," the salesperson added.
Asian currencies were mixed on the day, with the offshore Chinese yuan gaining nearly 0.2% while the Malaysian ringgit and Korean won declined.
The U.S. central bank also updated its projections to show that its benchmark interest rate would fall by another half a percentage point by the end of this year, a full percentage point next year, and half a percentage point in 2026.
Following the Fed's cut, "all eyes will be on the Reserve Bank of India's (RBI) response and whether the rupee can maintain its upward trajectory," Amit Pabari, managing director at FX advisory firm CR Forex, said.
Traders expect the RBI to curtail sharp gains in the currency by absorbing dollar inflows in a bid to build its foreign exchange reserves and preserve the competitiveness of Indian exports.
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