Rupee gains as dollar drops to four-month low amid global uncertainty

The Indian rupee strengthened on Tuesday supported by likely intervention by the central bank and a rise in Asian currencies, as the dollar weakened to its lowest level since November against major peers.

The rupee closed at 87.2125 against the US dollar, up 0.1per cent on the day.

The currency had declined to 87.3850 earlier in the session, as dollar bids spurred by the maturity of positions in the non-deliverable forwards (NDF) market exerted pressure.

Likely intervention by the Reserve Bank of India though, helped limit its losses, traders said. Later in the session, the rupee benefited from weakness in the dollar.

 

The dollar index was down 0.5per cent at 103.3 while Asian currencies rose, with the offshore Chinese yuan leading gains, up 0.4per cent on the day.

"Heightened US policy uncertainty created by President Trump is raising doubts over the US dollar's safe haven role alongside the unwinding of popular US tech trades," MUFG Bank said in a note.

Uncertainty about trade tariffs and their impact on the growth-inflation dynamic in the United States has sapped risk appetite from markets alongside a sharp selloff in US equities.

Worries about growth have also prompted traders to raise bets on rate cuts by the Federal Reserve this year.

Traders are now pricing in 85 bps of easing from the Fed this year, compared to 75 bps on Monday, LSEG data showed.

Meanwhile, dollar-rupee forward premiums gained, with the 1-year implied yield rising as much as 4 basis points to 2.20per cent, aided by a decline in US bond yields.

Investors now await the release of US and India's consumer inflation data, due Wednesday. The data is expected to influence expectations of rate cuts by the countries' central banks.

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