Rupee 1-year forward premium implied yield fell to 2.06%, its lowest since Feb. 20. Still, the local currency stayed within an eight paisa range and dropped less than its counterparts, as has been the case over the past month due to the Indian central bank's presence near the 83-level. Most Asian currencies and stocks declined, reversing their China-optimism fuelled gains, while the dollar index rose 0.3%. "Markets have been extremely data-sensitive lately and are sometimes reacting more to that than monetary policy meetings," said Gaurang Somaiya, FX & bullion analyst at Motilal Oswal Financial Services. However, the rupee is expected to stay under 83 and be range-bound in the short-term with sputtered inflows supporting it. The benchmark 10-year U.S. Treasury yield firmed to 4.0460%, while the 2-year yield - which moves in step with interest rate expectations - rose as much as 4.9370%, its highest since 2007. The U.S. ISM survey showed a rebound in prices at the factory gate, while German inflation accelerated in February, according to latest data.
Fed funds futures have started pricing in a terminal rate near 5.50%. Meanwhile, according to the CME FedWatch tool, the possibility of a 25 bps hike in the July meeting went up to 40%, compared with less than 1% a month ago. Fed officials also kept up with their broadly hawkish rhetoric, as Minneapolis Fed President Neel Kashkari said he was inclined "to push up" his policy path. (Reporting by Anushka Trivedi; Editing by Sohini Goswami)
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