Rupee rises as Treasury yields continue to ease on Fed pivot hopes


MUMBAI: The rupee advanced on Friday as the dollar fell and Treasury yields recoiled on signs of a softening US economy, which bolstered views that the Federal Reserve may opt to slow down the pace of its rate hikes.
The rupee firmed 0.18% to 82.34 per dollar by 0456 GMT, trading in a narrow seven paisa band. The local unit had a strong showing on Thursday but dollar demand from importers and foreign banks pushed it to close at 82.49, well off its session high.
For the day, the rupee was tracing the dollar and would “likely hold this range as we head to next week … packed with the Fed, Bank of England and now added Reserve Bank of India (RBI) meeting,” said Gaurang Somaiya, forex analyst at Motital Oswal Financial Services.
Volatility can be expected and the rupee may test breaching the 83-mark again next week, he added.
The RBI said late on Thursday it would host an additional meeting of its policy-setting committee on Nov. 3, which sources said was to potentially discuss its response to the government on failing to stick to its inflation target for three consecutive quarters.
Meanwhile, buoying the markets was the yield on the benchmark 10-year Treasury note sliding to 3.94% after data showed US consumer and business spending slowed in the third quarter, owing to the Fed’s monetary tightening.
Overnight, the European Central Bank joined the central banks of Canada and Australia in considering smaller rate increases than what investors had priced in.
It has fanned hopes that the Fed will contemplate similar moves and prompted traders to reassess their expectations. They now see only a 30% chance that the Fed will raise rates by 75 basis points in December, down from a probability of 65% last week.
These bets have seen the dollar index lose steam and drop around 1.4% so far this week.


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