The rupee fell on Wednesday in early trade even as the dollar remained tentative ahead of the Federal Reserve’s policy meeting minutes, which could provide information on the trajectory of inflation and interest rates.
Bloomberg showed the rupee was last changing hands at 81.7725 per dollar, compared to its previous close of 81.67 on Tuesday.
PTI reported that the domestic currency fell 14 paise to 81.81 against the US dollar in early trade.
“The rupee will remain in a range of 81.40 to 82.00 for the day as markets look to be in a consolidation phase before the next move,” said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
Investors will parse the Fed’s minutes from its most recent meeting, to be released later on Wednesday, for any indication of talks about slowing the rate of interest rate increases.
The dollar index, which measures the greenback’s performance against a basket of its major peers, was steady on Wednesday after falling 0.65 per cent overnight.
“The U.S. dollar lost a little of its recent gains (as) central bankers’ consensus about how much more interest rates should rise is fraying,” Commonwealth Bank Analyst Tobin Gorey wrote on Wednesday.
“Smaller or fewer rate rises are perhaps not a cause for optimism, it is cause for less pessimism.”
The overnight move reflected improved risk sentiment as stocks and bonds surged in response to stronger corporate profits and anticipation of more gradual Fed rate hikes, Carol Kong, a Currency Strategist at Commonwealth Bank of Australia, told Reuters.
That even as China tightened restrictions in some cities after a spike in Covid cases.
“The imposition of new restriction near term undoubtedly will have a negative economic impact, but at least for now, the market seems to focus on the fact that over medium-term China is looking to gradually move towards a strategy of living with COVID,” Rodrigo Catril, a Currency Strategist at National Australia Bank, told Reuters.
“That said, we think that setbacks are very likely in this process; thus, we should expect spikes in market volatility along the way,” he added.
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