This has helped keep the rupee in a narrow range and perform better than other Asian currencies.
The rupee's Asian peers came under pressure on Wednesday after U.S. yields overnight witnessed another move higher.
U.S. yields have been persistently rising on back of the ongoing reassessment on how high the Federal Reserve could raise rates. Futures are pricing in a peak Fed rate of 5.35% and less than 20 basis points (bps) of rate cuts in the year. An at least 25 bps rate hike at the next two Fed meetings has been fully priced in and there is a high likelihood of a third hike.
The recent U.S. economic activity and inflation have signalled that the Fed is likely to remain hawkish.
On Monday, data showed U.S. business activity unexpectedly
rebounded in February, reaching its highest level in eight
months.
Focus now turns to the minutes of the last Fed meeting.
"Note that the minutes were prepared before the string of
firm US data got released and may not be as hawkish as recent
Fed speak nor match up to current market pricing," DBS Group
Research said in a note.
(Reporting by Nimesh Vora; Editing by Sohini Goswami)
