MUMBAI, June 25 (Reuters) –
The Indian rupee edged higher on Friday as the dollar grappled with concerns over the future independence of the Federal Reserve and heightened expectations of cuts to U.S. benchmark interest rates.
However, dollar bids from foreign and state-run banks put a lid on the rupee’s gains after it managed to rise above the 85.50 mark in early trading.
The currency was last quoted at 85.5375 against the dollar, up 0.2% on the day.
The dollar index was at 97.4, hovering close to an over three-year low, while Asian currencies were trading mixed. India’s benchmark equity indexes, the BSE Sensex and Nifty 50, logged slight gains.
Speculation that U.S. President Donald Trump may make an earlier-than-usual announcement of the next Federal Reserve chair, who is expected to be more dovish, has raised wagers on policy easing by the Fed.
That, in turn, has weighed on the greenback, which is already under pressure over concerns about U.S. trade and fiscal policies this year.
The dollar index is down over 10% year-to-date and is on track for its biggest first-half fall since the start of the era of free-floating currencies in the early 1970s.
BofA Global Research holds a bearish view on the dollar over the medium to longer term due to U.S. economic uncertainty, the overhang of eventual Fed cuts, alongside a push from global real money investors, who are in the early stages of increasing FX hedging of U.S. assets.
Meanwhile, the dollar-rupee overnight swap rate nudged higher on Friday, with traders pointing to sell/buy swaps from foreign banks, likely spurred by dollar inflows related to a large domestic IPO.
Bidding for Indian lender HDB Financial’s $1.5 billion IPO is set to close on Friday. The issue was subscribed by nearly two times as of 11:30 a.m. IST. (Reporting by Jaspreet Kalra; Editing by Anil D’Silva)
