Rupee firms as cooling US inflation, recession woes hurt dollar

The Indian rupee advanced on Thursday after U.S. inflation cooled, while Federal Reserve officials flagged risks to the economy, which compounded troubles for the dollar index.

The rupee traded around 81.96 per dollar by 10:41 a.m. IST compared to 82.0775 in the previous session.

U.S. Consumer Price Index (CPI) climbed 0.1% last month after advancing 0.4% in February. Economists polled by Reuters had forecast the CPI gaining 0.2% in March.

However, core CPI remained elevated, which analysts warned could be a cause for concern.

Moreover, minutes from the Fed’s March meeting revealed worries among members regarding the banking crisis, with staff projections of a mild recession later this year.

That sent the dollar index down 0.6% overnight, while U.S. bond yields dropped in anticipation of Fed rate cuts.

Futures showed the expectations of a 25-basis point (bps) hike from the Fed next month were near 71%, with that likely being the final hike before rates are cut from July onwards.

“Concerns about growth, rather than inflation, are likely to keep central bankers busy over the next 12 months,” said Anindya Banerjee, head of research – FX and interest rates at Kotak Securities.

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