INDIA RUPEE-Rupee logs best day in three weeks on rising bets of Fed pause

BY Reuters | ECONOMIC | 03/23/23 06:46 AM EDT

By Anushka Trivedi

MUMBAI, March 23 (Reuters) - The Indian rupee saw its best trading session in three weeks on Thursday, as Asian currencies firmed on anticipation that the U.S. Federal Reserve was near the end of its rate hiking cycle.

The rupee ended at 82.2625 per dollar, compared with its previous close of 82.6550.

Lack of inflows and potential dollar orders from oil companies may have pulled the rupee down from its high of 82.08 during the day, traders said.

The rupee aligned itself with peers like the Chinese yuan and the Thai baht, which rose around 0.5%, as the dollar index tumbled to a seven-week low and briefly slipped below the 102-level.

The Fed overnight hiked rates by 25 basis points (bps) and mellowed its hawkish stance by hinting it was on the verge of pausing after the recent collapse of two U.S. banks.

Although the central bank kept the door open to another hike but saw no rate cuts this year, the probability of a pause at the May meeting was almost even with a 25 bps hike, along with 70 bps worth of rate cuts in 2023.

There are still quite a lot of uncertainties as the fight against inflation in the United States has not been won, said Kunal Kurani, associate vice-president at Mecklai Financial.

"In case the next U.S. inflation print surprises on the upside, market pricing could change drastically as a hike would be back on the table."

In the near-term, the dollar seems to be pressured by a mix of Fed outlook, banking crisis as well as strength in the euro and the pound, traders said.

The Bank of England meets later in the day and is expected to raise rates for the 11th time in a row after a surprise jump in inflation, while a European Central Bank governing council member said more hikes maybe required.

(Reporting by Anushka Trivedi; Editing by Sonia Cheema)

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