Indian rupee halts 4 days of gains on wider May trade deficit, Fed outlook

MUMBAI, June 15 (Reuters) - The Indian rupee halted a four-day winning streak against the U.S. dollar on Thursday, as domestic trade deficit widened to a five-month high and the U.S. Federal Reserve signalled more rate hikes.

The rupee ended at 82.1750 to the dollar against previous close of 82.0950.

The currency had hit a five-week high of 82.03 on the back of dollar inflows pertaining to a major telecom conglomerate and a loan facility of a state-run entity, three traders told Reuters.

Indias merchandise trade deficit widened to $22.12 billion in May from $15.24 billion in April, according to a Reuters calculation based on data released by the government on Thursday. The deficit was at the highest since December.

The rupee also came under pressure due to a hawkish Fed, which expectedly left its policy rate unchanged at 5.00%-5.25% but flagged more rate hikes this year to bring down inflation.

The Feds dot plot showed that officials now expect the Fed Funds rate to top out at 5.6% this year, implying two more 25 basis point increases in 2023, up from the 5.1% they projected in the last set of forecasts released in March.

The one-year dollar-rupee forward premiums fell to a six-month low of 1.69% in intraday trades on the narrowing interest rate outlook between U.S. and India. It ended at 1.71%, from 1.75% on Wednesday.

\“Majority concur that after Feds pushback against dovish talk, USD/INR may now find strong support near 82.00 and resistance near 82.60-82.70,\” said Anindya Banerjee, head of research, FX and interest rates at Kotak Securities.

The dollar index was trading above 103.00, after falling to a one-month low of 102.66 on Wednesday.

Asian currencies were broadly lower, barring the Chinese yuan, which rose 0.2% after the countrys central bank confirmed a policy reversal with a fresh rate cut.

Traders are now awaiting the European Central Banks policy decision later on Thursday for fresh cues.