The sharp pullback in Fed peak rate expectations saw the
dollar index decline 0.4% this week and most emerging
market Asian currencies advance.
The rupee tends to react less to Fed repricing and
outperform during periods of sideways-to-higher movement in the
dollar and underperform when it weakens.
(Reporting by Anushka Trivedi; Editing by Sohini Goswami)
By Anushka Trivedi
MUMBAI, March 17 (Reuters) - The Indian rupee firmed
against the U.S. dollar on Friday as the broader market
sentiment improved following the rescue of crisis-hit banks in
the United States and Europe, but the local currency ended lower
for the week.
The rupee finished at 82.5525 per dollar, compared
with its previous close of 82.73. For the week, it fell 0.62% as
most Asian equity markets notched weekly declines.
The rupee rose during the day but mostly hovered near the
key resistance level of 82.50. Markets were upbeat after U.S.
lender First Republic Bank was rescued by a $30-billion
injection from 11 banks.
The bank was caught up in a widening crisis triggered by the
collapse of two other mid-size U.S. banks over the past week.
The move followed Credit Suisse's announcement on
Thursday that it would borrow up to $54 billion from the Swiss
National Bank after the central bank pledged a financial
lifeline to the embattled lender.
"It's plausible that confidence can stabilise further if we
do not see any more bank failures, especially over coming days
ahead of the Fed meeting," said Christopher Wong, currency
strategist at OCBC Bank.
The Federal Reserve is expected to raise rates by 25 basis
points (bps) next Wednesday as the U.S. labour market remains
tight, with investors watching out for how many more hikes the
central bank's dot plot would indicate. Some market participants have called for a pause to the
tightening cycle in the wake of the banking crisis, before which
a 50 bps hike was being priced in.
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