INDIAN RUPEE Rupee strengthens as risk assets gain ahead of Fed meeting

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MUMBAI, Oct 31 (Reuters) – The Indian rupee rose on Tuesday as hopes that the U.S. Federal Reserve could slow the pace of its rate hikes boosted risk appetite and hurt the dollar.

The rupiah finished at 82.6950, down from a previous close of 82.78. It traded within a tight 10 paisa range throughout the session.

The Chinese yuan reversed earlier losses to soar, dragging most of Asia’s emerging currencies with it, as the dollar index fell 0.5% to 110.95 ahead of the Fed meeting outcome.

The benchmark US 10-year yield also fell 9 basis points to 3.9839%, nearly 23 basis points from its peak this month.

The Fed is expected to raise its key rate by 75 basis points (bps) after its two-day meeting on Wednesday. But for the December meeting, futures markets are divided on the likelihood of a 75 or 50 basis point increase.

The Fed may not immediately hint that it will slow the pace of its rate hikes, but the impact of its monetary tightening should start to affect the economy, a trader at a major bank has said. private sector, which sees a “very strong chance” of a 50 basis point hike in December.

Even if the dollar drops a bit, the yuan’s fortunes will remain key to the rupee for some time, another forex trader said on an advisory platform.

“If the yuan depreciates, but the rupee does not, it is negative due to India’s inflated trade deficit with China.”

China’s currency has fallen nearly 13% this year to its lowest level in 15 years due to chaos in its real estate sector and tight COVID-19 restrictions that are dampening economic activity.

The mood in the stock markets was even brighter as Indian stocks (.NSEI) advanced 0.7%, while U.S. stock futures pointed to a strong open on Wall Street.

Reporting by Anushka Trivedi in Mumbai; Editing by Dhanya Ann Thoppil

Our standards: The Thomson Reuters Trust Principles.

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