Mumbai: The rupee moved up on Tuesday, 11 December, as dealers bought the unit anticipating a wave of foreign buying of local shares if the US Federal Reserve cuts its funds rates as expected later in the day.
At 9:55am, the partially convertible rupee was at 39.372/382 per dollar, nudging up from the previous close of 39.40/41. It hit a near-decade high of 39.16 last month.
“The market has discounted a 25 basis point cut from the Fed, and flows are expected to come in after the decision,” said a dealer with a private sector bank.
“But we will all be watching for what the Fed says when it cuts rates, because that should give us a good indication about the future,” the dealer added.
The Fed is widely expected to lower the key federal funds rate by 25 basis points to 4.25% on Tuesday. It has lowered rates twice since mid-September. The decision is expected at 1915 GMT.
Sentiment on the rupee was bolstered by a positive opening on India’s broader share index.
The dollar hit a one-month high against the yen on Tuesday as expectations for a bold interest rate cut by the Fed waned following solid US economic data.
Gains in the rupee were also limited as some dealers were cautious about provoking central bank intervention against the local unit.
The Reserve Bank of India bought $52 billion in intervention in the first nine months of the year and is widely seen as having played an active role in the rupee market in October and November too.