On Friday , Indian Rupee seems start trading range bound with positive note despite dollar held gains against major currencies, after the Federal Reserve's aggressive new strategy to lift employment and increased tolerance for higher inflation pushed U.S. bond yields up.
The USDINR depreciate by 49 pips (0.66%) end at 73.81 on Thursday, its highest close recorded since March 11. It moved between 73.7925 - 74.3825 during the day after RBI Governor Shaktikanta Das said the central bank has not exhausted its ammunition to deal with the current situation due to the coronavirus pandemic.
At the current level, the rupee has recovered 3.43 per cent from an all-time low of 76.91 registered in April, but is still down 4.03 per cent against the US currency so far this year.
If the RBI continues to buy dollars while conducting open market operations (OMOs), this might double up the rupee liquidity in short run, which the central bank might not be favoring considering the spike in inflation.
INTRADAY RANGE - (73.56 - 74.15) 74.58
The FED on JACKSON HOLE
Fed's Jackson Hole symposium, which was held virtually this year, Chair Jerome Powell said the central bank will seek to achieve 2% inflation on average, so that periods of super-low inflation would likely be followed by an effort to lift inflation "moderately above 2% for some time," and to ensure economic recovery and job creation.
Following Powell's comments, the dollar initially fell sharply against the yen and the euro, but reversed as longer-term U.S. Treasury yields bounced back to their highest levels in months.
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