Adjusted for fiscal year costs, the Indian rupee was lower against the US dollar on Wednesday on higher US yields and expectations of dollar inflows.
The rupee was at 82.26 per dollar at 10:20 IST compared to 82.1875 in the previous session. The spot date for USD/INR has changed from March 31 to April 3 next fiscal year.
A trader said that holding short dollar positions for the shift has a higher carry yield and the rupee’s drop at the opening was in line with this. A higher open “shouldn’t have much legs” with speculators wary of possible dollar inflows related to
Asian currencies were mixed on the day as US yields rose. Easing concerns about the US banking sector prompted traders to reassess their expectations for the Federal Reserve’s rate trajectory.
Expectations about the extent of rate cuts have eased
At the height of the turmoil, traders priced in a rate cut of more than 200 basis points from the peak to December 2024. That has now fallen to 164 basis points, according to DBS Research. Moreover, the odds of whether the Fed will decide to raise rates at its May meeting or take a shot are now almost a coin toss.
The two-year US yield is now well off last week’s lows, yet the dollar has not strengthened against its major counterparts. A tepid dollar index despite rising U.S. yields suggests an “undercurrent of demand for safe havens is missing,” said Amit Pabari, CEO of CR Forex.
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