By Anushka Trivedi
MUMBAI, April 18 (Reuters) - The Indian rupee eased
against the dollar on Tuesday as Treasury yields rose on
increasing bets of a Federal Reserve rate hike following more
robust U.S. data.
The rupee finished at 82.04 per dollar, compared
with 81.9725 in the previous session.
The dollar index gave up gains late in the session as
the pound jumped on strong labour data, but the rupee
failed to capitalise, finding strong resistance at the 82-level.
It is unclear whether there was one large buyer as private
and public sector banks, both, were seen bidding for dollars,
said a trader.
"We still think the rupee should strengthen in the coming
days, but price action over the past few days has suggested
overcoming the 81.80-81.50 zone will be difficult," the trader
added.
Meanwhile, Indian equities deepened losses to weigh
on sentiment further, after a report that the country was
possibly looking to overhaul its direct tax laws, including
increases in capital gains taxes for top-income earners.
However, the tone of the market was mostly set by Fed funds
futures indicating another 25 basis point hike being almost
certain at next month's meeting after U.S. data overnight. The dollar jumped the most in almost a month overnight,
while two-year and 10-year Treasury bond yields hit multi-week highs.
Data showed confidence among U.S. single-family homebuilders
improved for a fourth straight month in April, while the New
York manufacturing index increased for the first time in five
months as measures of new orders and shipments surged.
"Investors have been betting that the Fed might cut rates
this year as inflation cools. However, we think these
expectations might be premature," wrote HDFC Bank economists.
The hike in May could be the Fed's last, and so U.S. bond
yields should be close to their peak and, dollar downtrend
should continue, they added.
(Reporting by Anushka Trivedi; Editing by Sohini Goswami)
anushka.trivedi.thomsonreuters.com@reuters.net))
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