Rupee trades higher against US dollar on anticipation of another Fed rate hike

Rupee

Indian rupee opened higher against the US dollar tracking gains in local equities and Asian currencies market.

At 9.30 am, the domestic currency rose 0.1 percent to 81.98 a dollar from its previous close of 82.05. The benchmark Sensex rose 0.36 percent to 66828 points.

According to analysts, the markets are currently driven by the anticipation that the Federal Reserve will raise interest rates in July, which is likely to mark the end of the current tightening cycle. Any weak economic data will be interpreted as increasing the likelihood of rate cuts early next year.

At present, there is a positive outlook on risk sentiments due to the belief that the US economy is experiencing a "Goldilocks phase." This implies that the economy is expected to achieve a soft landing, characterized by both low inflation and low growth, which is favorable for market conditions.

"Rupee kept oscillating between the 82.00-82.20 range with an overall downside bias led by a softer dollar and chunky inflows in the domestic market. Further inflows are expected as Jindal Steel is in talks to raise nearly $3 billion and Bain Capital is in talks to acquire Adani Capital for Rs 1,500 crore. Well, it would be interesting to see if RBI intervenes around 81.80 levels this time too as the recent RBI bulletin suggests a spot intervention of nearly $7.7 billion in May to curb unprecedented appreciation in the rupee. A break below 81.80 will open up room for 81.50 to 81.20 levels and the upside looks limited up to 82.30-82.50 levels," said CR Forex in its note.

Asian currencies were trading higher. Thai Baht rose 1 percent, the South Korean won gained 0.55 percent, the Taiwan dollar 0.15 percent, the Indonesian rupiah 0.13 percent, the Japanese yen and Singapore dollar climbed 0.1 percent each, Malaysian ringgit and China renminbi rose 0.05 percent each.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 99.762, down 0.08 percent from its previous close of 99.842.