Rupee hits 3-week high as US yields ease

The rupee strengthened to a three-week high on Thursday as a pullback in US Treasury yields helped relieve the recent pressure on Asian currencies.

The rupee climbed to 82.3725 to the US dollar, before easing to end at 82.5750, up from 82.6850 in the previous session.

That followed the local unit clocking its strongest single-day gain in two months on Wednesday.

"Today, it was about the momentum from yesterday and a good set of cues for Asia FX overall," said a currency trader at a bank.

"Think we'll have a quiet session tomorrow and then on Monday, we will be reacting to Jackson Hole."

Federal Reserve Chair Jerome Powell will speak at Jackson Hole on Friday around US trading hours. His comments will be watched for any cues on whether more rate hikes are needed and what he makes of the recent move in US Treasury yields.

US yields have been surging this month on expectations that the Fed will need to hold rates higher for longer. However, on Wednesday, there was a bit of relief.

The yields fell following weak US data, with the 10-year dropping 13.6 bps and the 2-year yield shedding 7.2 bps.

Asian currencies also strengthened on Thursday, with the Korean won and the Indonesian rupiah leading gains.

The rupee's recovery over the last two sessions is an opportunity for importers, according to analysts.

"Now that the rupee is back in its previous range, we believe this is a right opportunity to load up on import hedges and lighten up on export hedges," said Srinivas Puni, managing director at forex advisory firm QuantArt Market Solutions.