The rupee was steady on Friday after weakening sharply in the previous session, with risks tilted in favour of the dollar as Federal Reserve policymakers' comments this week shattered hopes for any moderating of the US central bank's ultra-aggressive interest rate hikes path.
Bloomberg showed the rupee was last trading at 81.5963 per dollar in early trade, compared to its previous close of 81.6475.
"In the last five sessions, the rupee hit a low of 80.50 and a high of 81.85 in the non-deliverable forward markets. This is the kind of volatility the market is living in with crazy moves driven out of news, sentiments, data, and expectations, with underlying fundamentals seeming to have no place," said Amit Pabari, Managing Director of CR Forex Advisors.
PTI reported that the domestic currency rose 10 paise to 81.54 against the US dollar in early trade.
"As Asian markets are doing well this morning, and Asian currencies slightly stronger, the rupee will be in a range of 81.20 to 81.80 for the day. Yesterday, the rupee had fallen to 81.65 levels on dollar demand from corporates, but the currency remained in a small range throughout the day," said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
The dollar and US bond yields were both propelled higher overnight after St. Louis Fed President James Bullard warned that interest rates could need to reach a higher peak than markets predictions to be "sufficiently restrictive" to bring down decades-high inflation.
If the Fed keeps increasing at the current pace, "by the time they get the information that they've been successful in slowing the economy and slowing inflation, it might be too late," Ellen Hazen, Chief Market Strategist at FL Putnam Investment Management, said on Bloomberg Television. "It's just too soon to know exactly how this is going to play through the economy, and that's the biggest risk."
While the dollar steadied on Friday after gains in the previous session, it was headed for its best week in a month.
"The message is about the desire from the Fed to lean against what they would consider premature loosening of financial conditions," said Brian Daingerfield, an analyst at NatWest Markets. "And on that front, message received."
"The Fed seems squarely focused on over-signalling on the tightening front and hoping the data slow to a point where they can have the flexibility to undershoot."