MUMBAI: The Indian rupee reached a two-week high, aided by dollar sales by a UK-headquartered bank, while forward premiums were off their highs following the presentation of the budget earlier in the day.
The rupee ended at 82.9650 to the U.S. dollar, up from 83.0425 in the previous session. The currency hit its highest intraday level of 82.9325 since Jan. 16.
“Most of the time, the names we kept on hearing on the USD/INR offer were foreign banks,” an FX salesperson at mid-sized private sector bank said. He named a UK-based bank, while adding that he wasn’t aware of the particular flow related to the dollar selling.
The recovery in USD/INR from the lows “can be put down to the typical buying we are used to”, he said, before adding that volumes on Thursday were much better compared to the last few trading sessions.
The rupee was further pegged back by the uptick in the dollar index during the European trading session.
U.S. Federal Reserve Chair Jerome Powell on Wednesday indicated that an interest rate cut at the March meeting was unlikely, hurting risk appetite and propping up the safe haven dollar.
Post Powell’s comments, economists at Goldman Sachs and Capital Economics said they now expect the Fed to deliver the first rate cut in May instead of March.
Market focus now turns to the Bank of England’s policy decision, due later in the day.
“Nobody expects the Bank to change policy (on) Thursday. Yet, when the BoE changes its language to drop any suggestion that policy rate could rise further it will be a dovish shift,” ING Bank said in a note.
Meanwhile, USD/INR forward premiums climbed at the open, with the 1-year reaching 1.90%.
The premiums, however, retreated to end slightly lower on the day after India’s gross borrowing projection for the fiscal year 2024-2025 was less than what economists had expected.
(Reporting by Nimesh Vora; Editing by Sonia Cheema)
