Rupee inches higher amid receding Fed rate cut bets; forward premiums slip

Rupee versus Dollar: The Indian Rupee initiated the trading week on a positive note, extending its upward trajectory from the previous session, despite a surge in U.S. bond yields as investors scaled back expectations of a rate cut by the Federal Reserve in June.

As of 9:45 am, the Rupee, trading at 83.26 to the Dollar, edged slightly higher compared to its previous session close of 83.2950. This follows a nearly 0.2 per cent gain in the Rupee on the preceding day, recovering from Thursday's record low of 83.4550.

Local and foreign banks engaged in broad-based Dollar sales, contributing to the Rupee's strength in Monday's early trading, as reported by a foreign exchange trader at a state-run bank.

The currency is anticipated to maintain a marginal upward bias, according to the trader.

Traders also noted that a moderation in crude oil prices, attributed to easing tensions in the Middle East, could further bolster the Rupee. Brent crude oil futures saw a 1.6 per cent decline, settling at $89.70 per barrel.

While the Dollar index remained relatively unchanged at 104.3, Asian currencies exhibited mixed performance.

U.S. Treasury yields surged following data indicating stronger-than-expected job creation in March, prompting a revision in the odds of a rate cut at the Fed's June meeting. The 10-year U.S. Treasury yield climbed to 4.41 per cent in Asia, marking a 7 basis points (bps) increase from Friday.

According to CME's FedWatch tool, the probability of a June rate cut dipped below 50 per cent, down from approximately 57 per cent a week earlier.

Conversely, Dollar-Rupee forward premiums experienced a decline, with the 1-year implied yield down 2 bps at 1.65 per cent, influenced by the uptick in U.S. bond yields.

Anil Bhansali, head of treasury at Finrex Treasury Advisors, projected that the Rupee would fluctuate within a range of 83.20 to 83.40 on Monday.

(With Reuters inputs.)