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In early Thursday trading, the Indian rupee displayed a slight weakening trend as exporters engaged in dollar sales, offsetting concerns about the surge in U.S. Treasury yields following a hawkish Federal Reserve policy. Here’s a summarized look at the key points:

  • The rupee traded at 83.0975 by 11:15 a.m. IST, a marginal decline from the previous session’s rate of 83.0725.
  • Exporters, who were previously passive, are expected to become more active at the current exchange rates, according to a foreign exchange sales executive at a private bank.
  • Despite this, forex traders at a private bank suggest that USD/INR is likely to maintain a “buy on dips” bias, indicating a preference for purchasing opportunities.
  • Other Asian currencies weakened as U.S. Treasury yields surged following the Federal Reserve’s hawkish tone. The Fed’s summary of economic projections revealed a reduction in projected rate cuts for 2024, from 100 basis points in June to 50 basis points.
  • U.S. Treasury yields, both short-term and long-term, reached multi-year highs, with the 2-year yield at 5.20% and the 10-year yield at 4.44%.
  • Concurrently, the dollar index (DXY) reached a six-month high, reflecting the market’s response to the Fed’s hawkish stance.
  • While the rupee faced the risk of reaching a record low against the dollar, intervention from the Reserve Bank of India has prevented this scenario.
  • Forecasts suggest that the rupee will likely remain within the 83-83.25 range in the near term, potentially requiring a significant catalyst to break out. Apurva Swarup, vice president at Shinhan Bank India, noted that previous interventions may cast a shadow on the day’s trading session.

These developments underscore the influence of global economic factors, particularly the Federal Reserve’s policies and U.S. Treasury yields, on the Indian rupee’s performance in the foreign exchange market. Traders and investors will continue to monitor these dynamics closely for potential implications on currency strategies and market sentiment.