Rupee resumes uptrend on likely dollar inflows, Fed risks linger

A customer hands Indian currency notes to an attendant at a fuel station in Mumbai

By Nimesh Vora

MUMBAI (Reuters) - The Indian rupee rose against the U.S. currency on Thursday, supported by dollar inflows and the underlying positive momentum, traders said.

The rupee was at 81.8575 to the U.S. dollar by 10:22 a.m. IST compared with 82.0550 in the previous session.

The rupee has not been impacted by the change in the repricing of what the Federal Reserve is likely to do at this month's meeting. The local currency is marginally higher than what it was before Fed Chair Jerome Powell's hawkish comments.

On the back of Powell's comments, the odds of the Fed reverting to a 50-basis point (bps) rate hike at this month's meeting have jumped to nearly 70%. The Fed peak rate expectations have reached 5.66%.

It is to be expected that the rupee will do better than the rest of Asia when the dollar index rallies, but it is surprising to see this kind of resilience at near to 82, a spot trader at a private sector bank said.

Dollar inflows are helping negotiate the renewed Fed concerns, they added.

India’s March fiscal year-end may be an underlying factor helping the rupee, according to traders. India sees increased capital inflows in March, possibly related to FDI and inter-company loans, Nomura pointed out in a note released late last month.

Most other Asian currencies were slightly lower for the day, weighed by worries over the Fed's stance. Powell on Wednesday reaffirmed his message of higher and potentially faster interest rate hikes and noted that a decision would hinge on upcoming data.

There are two important data points before the Fed's March 21-22 meeting - the U.S. jobs report on Friday and the consumer inflation data on Tuesday.

After Powell’s speech, the market will be incredibly sensitive to the outcome of the U.S. jobs report, Chris Weston, head research at broker Pepperstone, said in an email.

(Reporting by Nimesh Vora; Editing by Janane Venkatraman)