Rupee jumps as UK fiscal budget turnaround brings

The Indian rupee strengthened on Tuesday to hover close to the 82 per dollar mark, as risk sentiment improved after reversal of Britain's controversial fiscal plans pressured the greenback.

The rupee INR=IN jumped 0.35% to 82.05 by 0442 GMT, after having traded in a narrow band near the 82.40 level for the past five sessions.

The currency has not traded under 82 per dollar in nearly two-weeks and traders see low chances of it breaching that in this session.

Even if the rupee firms to that level, it will be for a short period because oil companies are expected to bid for dollars, a Mumbai-based trader said.

Any level below 82 per dollar was good for importers with near-term exposures to buy as USD/INR premiums are currently lower too, he added.

Asian currencies and shares gained across the board as the dollar index =USD extended losses to decline 0.2% to 111.84, a sharp pullback from trading above 113 all of last week. 

It was pressured by the sterling gaining overnight amid improved risk appetite after the UK's new finance minister Jeremy Hunt scrapped most of Prime Minister Liz Truss's unfunded tax cuts that had caused turmoil and forced the Bank of England to intervene. 

However, elevated US yields could potentially weigh as the benchmark 10-year yield remains just above 4%, while the 2-year hovers around 4.42%, although a retreat in longer dated bonds was seen after gilts in the UK gained. 

Meanwhile, in an interview with Reuters, RBI monetary policy committee member Jayant Varma said the central bank should pause interest rate hikes despite unacceptably high inflation to avoid stalling a recovery in economic growth.

After minutes of last month's MPC meeting showed similar views by Varma and another member, several analysts are starting to revise down India's terminal repo rate and now don't see it exceeding 6.50% this year.