INDIA RUPEE-Rupee tracks Asian peers gains on higher June Fed rate cut bets; forward premiums jump

By Jaspreet Kalra

MUMBAI, March 21 (Reuters) - The Indian rupee rose on Thursday, tracking its Asian peers after the U.S. Federal Reserve kept its rate projections for 2024 unchanged, prompting investors to raise bets on the possibility of the first rate cut coming in June.

The rupee was at 83.1175 against the U.S. dollar as of 10:05 a.m. IST, higher by 0.05% from its close of 83.1575 in the previous session.

The currency had dropped to a two-month low on Wednesday due to dollar demand from importers, including local oil companies.

The dollar index was little changed at 103.2, after dropping 0.5% on Wednesday. Most Asian currencies rose on Thursday, led by the Korean won's 1.1% jump.

The Fed's fresh dot plot indicated policymakers expect three rate cuts this year, unchanged from their forecast in December. That lifted the odds of rate cuts starting in June to nearly 75% from about 59% a day earlier, according to CME's FedWatch tool.

U.S. bond yields fell after the Fed's decision, with the 2-year yield last quoted at 4.58% in Asia trading, down 12 basis points from its close on Tuesday. The 10-year yield also edged lower and was last quoted at 4.25%.

"Soft US yields are likely to lift the rupee ... but corporate dollar outflows before the financial year-end may exert downward pressure," said Arnob Biswas, head of foreign exchange research at SMC Global Securities.

Meanwhile, dollar-rupee forward premiums rose with the 1-year implied yield up 3 basis points at 1.64%, aided by the higher odds of a Fed rate cut in June.

The bias on both the rupee and forward premiums is tilted higher for the day, a foreign exchange trader at a state-run bank said. But the key is if local dollar demand continues to curb the rupee's gains, the trader added. (Reporting by Jaspreet Kalra; Editing by Savio D'Souza)