The Indian rupee ended stronger on Thursday as the dollar index plumbed to multi-week lows, while an uptick in forward premiums aided the spot rupee.

The rupee closed at 81.95 to the dollar against a close of 82.0375 on Wednesday.

The low volatility in the domestic unit is making things very certain for importers and exporters, said Arnob Biswas, FX research head at SMC Global.

The rupee forward premiums have also inched up, which is helping to hold the positive sentiment in the currency, Biswas said.

The USD/INR 1-year implied yield climbed to 1.86%, its highest since May 29, from 1.78% in the previous session.

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There is paying by public sector banks, traders said.

The rupee is likely to strengthen beyond the 80-per-dollar level in 2024, helped by foreign inflows, said Jayesh Mehta, Managing Director and India treasurer at Bank of America

The dollar index dropped to 101.950, its lowest since May 12, after U.S Federal Reserve Chair Jerome Powell's testimony, in which he said that more rate hikes were needed to fight inflation.

Price action in the forex space suggests investors are losing interest in the strong dollar story and are reminded to seek out opportunities overseas, ING analysts said in a note.

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Meanwhile, risk sentiment across the equity markets remained subdued due to the Fed's hawkish views.

Markets are now eyeing a policy decision by the Bank of England and investors are mulling the prospect of a higher-than-expected interest rate hike by the central bank.

Due to this, the interest in GBP/INR is more, analysts said.

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