MUMBAI: The Indian rupee was higher against the US currency on Thursday after US Federal Reserve Chair Jerome Powell’s comments prompted traders to dump the dollar.

The rupee was at 81.12 per US dollar by 10:30 a.m. IST, up from 81.4225 in the previous session.

At one point, the local unit managed to nudge above 81, the first time it has done so since Nov. 14.

Asian currencies rose by as much as 1% and the dollar remained well-offered against its major peers after Powell said that rate hikes could be dialled down as soon as December and that the Fed did not want to over-tighten.

Powell reiterated that the central bank had a long way to go to achieve price stability.

The 2-year US yield declined 10 basis points (bps) overnight and fell more in Asia. “Chair Powell struck a more neutral tone amidst signs of weakening data,” DBS Group Research said in a note.

The information provided by Powell was mostly known, but with stretched shorts in the front of the US yield curve, a rally of this magnitude (on bonds) is unsurprising, DBS added.

Indian rupee rises on positive Asian cues, runs into 81.50 resistance

A few analysts seemed to suggest that markets had overreacted to Powell’s comments.

“Markets did not heed much to Powell’s message that we are a long way from pausing the rate cycle,” Srinivas Puni, managing director at QuantArt Market Solutions, said.

“For now, INR is in a sweet spot and can enjoy some stability.” Rupee forward premiums rose from multi-year highs, tracking the fall in US short-term rates.

The USD/INR 1-year forward implied yield rose seven basis points to 1.96%.