March 07, 2024 / 12:32 PM IST

Indian rupee retreats from six-month high on likely cenbank intervention

Indian rupee retreats from six-month high on likely cenbank intervention

The Indian rupee rose to its strongest level in six months on Thursday aided by dollar sales from large foreign banks but likely intervention from the Indian central bank eroded the local unit’s early gains.

The rupee was at 82.7750 against the U.S. dollar as of 10:25 a.m. IST, up 0.05% compared with its close of 82.8225 in the previous session.

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The local unit rose to an intraday high of 82.7350, its highest since early September, before likely intervention from the Reserve Bank of India (RBI) ate into the currency’s gains, four traders said.

In addition, “the market was also buying,” as current levels on the dollar-rupee pair are quite appealing for importers, a foreign exchange trader at a state-run bank said.

The dollar index was down at 103.22, hovering close to its lowest level in a month that it hit on Wednesday, after U.S. bond yields fell following the release of data that signalled some softening in the labour market and Federal Reserve Chair Powell’s remarks that were not as hawkish as some had expected.

In his remarks to U.S. lawmakers, Powell said rate reductions will “likely be appropriate” later this year, “if the economy evolves broadly as expected.”

But progress on inflation “is not assured,” he added.

Powell’s remarks did little to move the needle on expectations of when the Fed will begin to ease rates, with investors pricing in a 67% chance of a June rate cut, according to CME’s FedWatch tool.

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Weakness in the dollar is bound to “support rupee” in early trading but significant appreciation is unlikely due to strong local dollar demand, Arnob Biswas, head of foreign exchange research at SMC Global Securities said.

Investors now await the release of U.S. jobless claims data due later on Thursday and the non-farm payrolls report due on Friday.