The Indian rupee climbed to its highest level in over one month on Tuesday, lifted by rising expectations that the U.S. Federal Reserve will kick off policy easing with a 50 basis points rate cut this week.
The rupee closed at 83.75 against the U.S. dollar, up 0.1% from its close at 83.8875 on Monday. The currency touched a peak of 83.71 during the session, its highest since August 1.
Broad based interbank dollar sales helped the rupee on Friday alongside gains in its Asian peers, traders said.
Reduction in long-positions on the dollar-rupee pair ahead of the Fed outcome on Wednesday also aided the local currency, a senior trader at a foreign bank said.
Indian foreign exchange and debt markets will be shut on Wednesday for a local holiday.
The dollar index was down slightly at 100.6 on Tuesday, hovering close to its year-to-date low, as markets raised the odds of a 50 basis point Fed rate cut to 67%, up from 34% a week earlier.
There are “higher chances,” of the rupee moving towards 83.60 now which would allow it to start catching up with its Asian peers after being an underperformer this quarter, Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.
The rupee has weakened 0.5% over the June-September quarter so far while its Asian peers have risen between 0.2% to 9.5%.
Meanwhile, dollar-rupee forward premiums nudged higher with the 1-year implied yield last at 2.31%, its highest since April 2023.
Investors now await U.S. retail sales data due later in the day which is expected to influence market expectations of the pace and extent of Fed rate cuts.
