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MUMBAI: The Indian rupee strengthened on Wednesday, aided by a drop in US bond yields which also helped lift most Asian currencies. The rupee was at 82.9825 against the US dollar as of 09:45 a.m. IST, barely changed from its previous close at 83.0550.

The dollar index was steady near 104.1 after falling nearly 0.3% on Tuesday.

The 10-year US Treasury yield also slipped 8 basis points (bps) to 4.08% on Tuesday as investors awaited cues on when the Federal Reserve may begin easing policy rates.

The dollar-rupee pair may be “slightly under pressure” during the day’s session but dip-buying demand from importers, including local oil companies, is likely to cap potential downside, a foreign exchange trader at a private bank said. Most of the rupee’s Asian peers ticked up, with the Indonesian rupiah and Philippine peso leading gains up by about 0.2% each.

The rupee has been “moving in small ranges” over the last two sessions which is likely to persist on Wednesday, Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, said.

Overall, analysts expect the rupee to strengthen slightly to 83 in a month and 82.84 in three months as the Reserve Bank of India continues to intervene in currency markets, according to a Reuters poll.

Indian rupee tracks mostly rangebound Asian peers, forward premiums inch up

While inflation in the United States has come down quickly and recent data is “looking positive”, the Fed is “not done yet”, Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday.

A string of strong US economic data and a pushback from Fed officials on early rate cuts have also prompted investors to reassess their bets on the future of policy rates.

Investors are currently pricing in a 21.5% chance of a rate cut in March, down from 64% at the start of January, according to the CME’s FedWatch tool.

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