MUMBAI, March 6 (Reuters) - The Indian rupee traded in a narrow range, and forward premiums rose on Wednesday ahead of Federal Reserve Chair Jerome Powell's testimony, while the overnight swap rate remained largely unchanged.
The rupee was at 82.8950 at 10:32 a.m. IST, unchanged from the previous session. The currency has been in a less-than-two-paisa range so far, with its 30-day annualised realized volatility at just 1%.
"INR remains stuck in a range and is going through what is a historically unprecedented low-volatility regime," Srinivas Puni, managing director at QuantArt Market Solutions, said.
"Markets are now focused on Powell’s testimony to US Congress and will parse his speech for clues on rate cut timings."
Powell is largely expected to reinforce the message that the Fed is in no rush to cut interest rates. Higher January inflation and a labour market that is holding up will mean that there will be no let-up in that message, according to analysts.
"Powell will confront and resist pressures from US lawmakers to cut interest rates," DBS Bank said in a daily note. Powell and other Fed officials have been advocating patience on rate cuts in the wake of the resilience of the US economy and the labour market, DBS pointed out.
Before Powell's testimony, dollar/rupee far forward premiums inched up, with the 1-year implied yield up two basis points at 1.68%. The drop in U.S. Treasury yields following the slight miss on U.S ISM services data propped up premiums.
Meanwhile, the dollar/rupee overnight swap rate was at 0.15 paisa, largely unchanged from Tuesday. The implied rupee yield remained below that of the overnight swap rate ahead of the Reserve Bank of India's $5 billion swap maturity. (Reporting by Nimesh Vora; Editing by Janane Venkatraman )
