By Siddhi Nayak
MUMBAI (Reuters) – The Indian rupee halted a four-day winning streak against the U.S. dollar on Thursday, as domestic trade deficit widened to a five-month high and the U.S. Federal Reserve signalled more rate hikes.
The rupee ended at 82.1750 to the dollar against previous close of 82.0950.
The currency had hit a five-week high of 82.03 on the back of dollar inflows pertaining to a major telecom conglomerate and a loan facility of a state-run entity, three traders told Reuters.
India’s merchandise trade deficit widened to $22.12 billion in May from $15.24 billion in April, according to a Reuters calculation based on data released by the government on Thursday. The deficit was at the highest since December.
The rupee also came under pressure due to a hawkish Fed, which expectedly left its policy rate unchanged at 5.00%-5.25% but flagged more rate hikes this year to bring down inflation.
The Fed’s dot plot showed that officials now expect the Fed Funds rate to top out at 5.6% this year, implying two more 25 basis point increases in 2023, up from the 5.1% they projected in the last set of forecasts released in March.
The one-year dollar-rupee forward premiums fell to a six-month low of 1.69% in intraday trades on the narrowing interest rate outlook between U.S. and India. It ended at 1.71%, from 1.75% on Wednesday.
“Majority concur that after Fed’s pushback against dovish talk, USD/INR may now find strong support near 82.00 and resistance near 82.60-82.70,” said Anindya Banerjee, head of research, FX and interest rates at Kotak Securities.
The dollar index was trading above 103.00, after falling to a one-month low of 102.66 on Wednesday.
Asian currencies were broadly lower, barring the Chinese yuan, which rose 0.2% after the country’s central bank confirmed a policy reversal with a fresh rate cut.
Traders are now awaiting the European Central Bank’s policy decision later on Thursday for fresh cues.
(Reporting by Siddhi Nayak; Editing by Varun H K)
