By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee strengthened modestly on Tuesday, mirroring gains in Asian peers as traders revived bets on a U.S. Federal Reserve rate cut next month, while dovish signals from the RBI governor helped drag local bond yields lower.
The rupee was at 89.16 against the U.S. dollar, up 0.1% as of 09:50 a.m. IST.
The currency had slumped to all-time low of 89.49 on Friday but has since found its footing on the back of dollar-selling intervention by the Reserve Bank of India on Monday and as dovish remarks from Fed officials boosted rates cut hopes.
“Last week’s break above 89 (on USD/INR) has essentially carved out a fresh range for the pair. For now, 88.90–90.20 looks like the operating band,” said Amit Pabari, managing director at FX advisory firm CR Forex.
Meanwhile, a dovish tilt in remarks from India’s central bank chief pulled down local bond yields.
Dollar-rupee far forward premiums shuffled sideways on Tuesday with the 1-year dollar-rupee implied yield last at 2.20% after rising 5 bps in the previous session.
Near-forward premiums nudged higher, partly on account of a modest arbitrage between onshore and non-deliverable forward contracts, a trader at a state-run bank said.
Asian currencies were up between 0.1% to 0.3% while the dollar index hovered little changed at 100.2.
A rebound in wagers on policy easing by the Fed also helped regional equities with MSCI’s gauge of Asian shares outside of Japan up about 0.6%. India’s benchmark equity index, Nifty 50 was a touch higher as well.
“Markets saw risk-on sentiment with increased pricing of a December Fed rate cut, coupled with continued signs of US-China détente in a call between President Xi and Trump,” MUFG said in a note.
U.S. President Donald Trump touted relations with China as “extremely strong” on Monday following a call with his Chinese counterpart.
(Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee)
