Rupee scales 5-week high, exceeds 82 to a dollar on hopes of Fed easing its stance

The rupee surpassed 82 to a dollar to a fresh five-week high on Tuesday, tracking gains in its Asian peers after the US wage data hinted that the Federal Reserve may ease its aggressive rate hikes.

The home currency opened at 82.29 and touched a high of 81.7925 to a dollar -a level last seen on December 2. At 2.15am, the domestic currency was trading at 81.80 a dollar, up 0.66 percent from its previous close of 82.36.

"Markets have taken the latest US data as a sign that the economy is gradually slowing, and should that continue, the Fed can step down to a 25bps interest rate hike from 50bps at its next policy meeting. This will keep a lid on the DXY and limit the gains to around 105.50 levels," said CR Forex advisors in its latest report.

A stronger yuan and falling crude oil also boosted the rupee, dealers said. The yuan was stronger after China reopened its borders with Hong Kong on Sunday for the first time in three years, suggesting an end to its stringent zero-Covid policy.

Falling US Dollar Index, which is trading near a seven-month low due to the Fed’s less hawkish tone and weaker US economic data, falling oil prices - which could help to ease pressure from widening trade deficit, dealers said.

Domestically, stronger purchasing managers index and inflation is into the RBI's target range also boosting sentiments.

Traders are now awaiting inflation print of the US and India this week for further cues. Both US and India CPI for December will be out on 12 December. Aaccording to Bloomberg US CPI expected at -0.10 percent. For India CPI for December expected at 5.9 percent from 5.88 percent a month ago.

"Inflows of Rs 10,000 crore from SBI infrastructure bond was the main reason for the fall in the dollar-rupee exchange rate from 82.25 to 81.75 today as oil companies stepped aside after buying for almost one month. The gain in Asian currencies and tepid comments by Fed officials also kept the dollar index lower, driving the rupee up. The next support is at 81.40 after 81.70 is broken," said Anil Kumar Bhansali, Head of Treasury Finrex Treasury Advisors LLP.