MUMBAI, Sept 19 (Askume) – The Indian rupee hit a two-month high on Thursday, benefiting from underlying portfolio flows and a stronger yuan after the Federal Reserve cut interest rates by 50 basis points.
The rupee closed at 83.68 against the US dollar, up 0.1% from its previous close of 83.75. During the session, the rupee hit a low of 83.57, its highest level since July 18.
Asian currencies rose, with the offshore yuan, the nearest currency to the rupee, rising 0.4% to 7.06, its highest level since May 2023.
The Federal Reserve’s unusual rate cut also pushed global stock markets higher . India’s benchmark stock indexes Sensex (.BSESN) and Nifty 50 (.NSEI) hit record highs and closed up 0.3% and 0.1%, respectively.
A trader at a leading private bank said the rupee got a boost from possible dollar selling by large foreign banks on behalf of custody clients.
The trader said the price action suggests the Reserve Bank of India is “okay with rupee appreciation” but it would be interesting to see how much gains they allow before stepping in.
Traders expect the Reserve Bank of India to continue allowing dollar inflows to boost its foreign exchange reserves, as well as ensure India’s export prices remain competitive.
The US dollar index continued to fluctuate, hitting its lowest in a year shortly after the Fed’s decision on Wednesday but soon recovered, but declined again in Asian trade. It was last down 0.4% at 100.5.
Charu Chana, head of FX strategy at Saxo, said: “At this stage, the risk-reward leans towards a strong dollar rather than a weak dollar, and the outlook is balanced.”
At the same time, the dollar’s forward premium against the rupee rose, with the one-year implied yield reaching 2.33%, the highest level since April last year.
