Rupee rises to 2-week high after dovish Fed statement

US Fed opened the door further for interest rate hike to as early as June

The rupee strengthened to its highest level in two weeks on Thursday after a dovish statement by the US Federal Reserve. 

The market had already expected that the US Fed will end its pledge to be “patient” in normalising monetary policy, but what helped was the dovish stance. 

The US Fed opened the door further for an interest rate hike to as early as June. But it signalled a more cautious outlook for the country’s economic growth and slashed its projected interest rate path, in a sign it remained concerned about the health of the economy.

Reserve Bank of India (RBI) governor Raghuram Rajan's statement yesterday also helped the currency market.

Rajan said yesterday in New Delhi that the country is fully prepared to deal with the situation arising out of US Fed’s moves on interest rates. Though Rajan did not rule out the possibility of near-term volatility, he said that in the medium term, markets will be back to normal.

The partially convertible rupee was at 62.42/43 per dollar by 0340 GMT, after hitting 62.35, its strongest level since March 5 and above its close of 62.69/70 on Wednesday.

“There has been some dollar buying by banks and corporates in early trades. Going forward this month, the rupee will trade in the range of 62-63 per dollar because ahead of financial year closing dollar demand from corporates may be there,” said Sandeep Gonsalves, forex consultant and dealer, Mecklai & Mecklai.