Rupee logs worst day in one month on hawkish Fed minutes, premiums plunge

economictimes.indiatimes.com:

rupee logged its worst day in a month against the dollar on Thursday, while far forward premiums plunged, as minutes of the U.S. Federal Reserve's latest meeting indicated that further monetary policy tightening was likely this year. The rupee ended at 82.51 to the dollar compared with 82.2250 in the previous session, after hitting a one-month low of 82.5475 in intraday trades.

The currency fell 0.35% in Thursday's session, logging its third straight day of losses. Asian currencies were mostly lower after minutes of the Fed's June policy meeting showed that most officials believed more rate hikes would be needed in 2023. «Some participants» also favoured another 25 basis point hike at last month's meeting, according to the minutes.

Although another round of monthly inflation and labour market data is due to release ahead of the Fed's July meeting, the odds «strongly favour» another 25 bps rate hike this month, Capital Economics said in a note. The odds of a rate increase in July have now risen to over 85%. U.S.

yields extended Wednesday's rise, with the 10-year yield climbing to a four-month high of 3.9830%. The 1-year premium declined to 1.32 rupees, the lowest in more than a decade. The 1-year implied yield declined to 1.59% during the session and ended at 1.60%.

«One can expect the rupee's fall to halt somewhere in the 82.60-82.70 band,» said Arnob Biswas, head of FX research at SMC Global Securities. Around this level, exporters may jump in amid expectations of dollar sales by the Reserve Bank of India, Biswas said, adding that the forex market will be further guided by more U.S. data sets this week.