By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee rose on Wednesday, hovering near a keenly-watched resistance level, helped by the U.S. dollar’s struggles in the wake of the rally in the Chinese yuan and mounting expectations of a follow-up large Federal Reserve rate cut.
The rupee was at 83.5350 at 11:34 a.m. IST, up from 83.67 in the previous session and just shy of the 83.50 handle that market participants are intently watching.
Last Friday, the rupee briefly rose above 83.50, but was pegged back by dollar outflows and hedging by importers.
The 83.40-83.50 region will be “challenging” for the rupee “to conquer”, Kunal Kurani, assistant vice president at FX advisory firm Mecklai Financial, said.
The dollar index breaking below 100 decisively and the Reserve Bank of India staying away will be needed to push the rupee past that region, he said.
The dollar index was at 100.30, near its year-to-date lows, weighed by rising possibility that the Fed will decide on a 50-basis-point rate cut at their next meeting in November. Weak U.S. consumer confidence data on Tuesday prompted investors to push up the odds of a rate cut of that size to more than 60%.
The dollar was further undermined by the upbeat Chinese yuan. The offshore yuan briefly climbed the psychologically important 7 level to the U.S. dollar and Chinese equities rallied on optimism over Beijing’s stimulus measures.
The stimulus will have “positive spillovers to other Asian currencies”, with the economies most closely linked with China benefiting, MUFG Bank said in a note.
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
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