US rate cut hope boosts Indian rupee

US rate cut hope boosts Indian rupee

Mumbai: The Indian rupee inched higher on Friday, with sentiment boosted by hopes for a US rate cut next week, which could make higher-yielding assets more attractive, though concerns about central bank intervention weighed.

At 9:30 a.m. (0400 GMT), the partially convertible rupee was at 39.45/46 per dollar, moving up from the previous finish of 39.485/495.

“With the Fed decision around the corner, the market is building up positions in anticipation of lots of inflows," said a senior dealer with a private bank.

Foreign funds have stepped up their purchases of Indian shares this month after remaining tepid in November, when they pulled out about $1.1 billion.

Overseas funds have been a key driver of the rupee’s 12% rise this year.

Asian stocks rose on Friday to four-week highs, which could drive domestic shares higher for a third day in a row, though dealers expect resistance to emerge as the market nears its record peak. The US Federal Reserve, which meets on 11 December, is widely expected to lower the key federal funds rate by 25 basis points to 4.25%. It has cut rates twice since mid-September, widening the interest differential with India’s rates.

Still, the Reserve Bank of India is expected to intervene against the local unit as it heads back towards a near-decade high of 39.16 hit last month.

According to the latest data, the central bank bought about $52 billion in the first nine months of the year, in a bid to temper the rupee’s ascent, and is also seen as having played an active role in the rupee market in October and November too.