By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee advanced slightly on Tuesday to its strongest level in a week, tracking gains in regional currencies, as the dollar remained on the defensive amid wagers that the U.S. Federal Reserve will deliver a rate cut this week.
The rupee rose to a peak of 88.05 per U.S. dollar in early trading and was last up 0.15% on the day at 88.08.
Asian currencies rose between 0.1% and 0.4%, with China’s yuan briefly revisiting a more than 10-month high of 7.1145 against the U.S. dollar.
The Fed is expected to resume its easing cycle this week and potentially leave the door open to further rate cuts, with investors focusing on policymakers’ “dot plot” projections for rates and guidance from Chair Jerome Powell.
Against a basket of major peers, the dollar was down 0.1% at 97.22.
“We have been emphasising our view that the restart of the Fed’s easing cycle, alongside concerns about its independence, should put downward pressure on the USD. This thesis will be tested with the outcome from the FOMC decision,” analysts at HSBC said in a note.
After touching a record low last week, the rupee appears on course to be rangebound in the near-term between 87.50 and 88.45, a trader at a mid-sized private sector bank said.
Positive news flow or portfolio inflows could drive the currency above 88 but importers are likely to step in to buy dollars near those levels, the trader added.
India and the United States will hold trade talks on Tuesday, New Delhi said, raising hopes for a breakthrough weeks after President Donald Trump imposed punitive tariffs on the South Asian nation for buying Russian oil.
Elsewhere, a Bloomberg News report, which said JPMorgan will cut India’s weightage in its emerging market bond index by 100 basis points to 9% from next year, had little bearing on debt and currency markets on Tuesday but could be a drag on sentiment.
(Reporting by Jaspreet Kalra; Editing by Eileen Soreng)
