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Updated February 6th, 2024 at 08:38 IST

Rupee watchful as dollar inches toward 3-month peak on abating Fed cut bets

The dollar index reached a high of 104.60 during the New York trading session on Monday, marking its strongest level since November 14.

Business Desk
Rupee
Rupee | Image:Republic
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Rupee in focus: The Rupee is poised to maintain a cautious stance against the dollar on Tuesday as the dollar index edges higher, propelled by encouraging US services data and a subsequent retreat in expectations for Federal Reserve rate cuts.

Forecasts from non-deliverable forwards suggest the Rupee will likely open flat to slightly lower compared to its previous session close of 83.0550 against the US dollar.

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Market sentiment favours the dollar's recent uptrend, with the USD/INR pair expected to maintain levels above 83, according to a foreign exchange trader at a bank. However, projections do not foresee a major move beyond 83.20, with the overall outlook for the Rupee remaining positive.

The dollar index reached a high of 104.60 during the New York trading session on Monday, marking its strongest level since November 14. 

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Meanwhile, US 2-year bond yields surged to nearly 4.50 per cent, while US equities experienced a decline.

January's US service sector expansion surpassed expectations, driving demand for the dollar. The positive data, combined with robust US job figures, prompted investors to reconsider their expectations for rate cuts.

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Minneapolis Federal Reserve President Neel Kashkari stressed in an essay published on Monday that the resilient economy and the potential for a higher neutral interest rate could delay the Fed's decision to reduce interest rates.

The probability of a March rate cut has dwindled to approximately 15 per cent, and expectations for a reduction at the May meeting have also eased. Looking ahead, analysts suggest the likelihood of a May rate cut remains uncertain.

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Asian currencies, following Monday's sell-off, mostly traded within a narrow range, awaiting further developments in the global market landscape.

(With Reuters Inputs)

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Published February 6th, 2024 at 08:38 IST

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