INDIA RUPEE-Fed cut hopes soothe rupee, buoy forward premiums at four-month high

By Jaspreet Kalra

MUMBAI, Sept 15 (Reuters) - The Indian rupee treaded water on Monday and the dollar-rupee forward premiums lingered near a four-month high, buoyed by expectations that the U.S. Federal Reserve will resume cutting interest rates this week after a 9-month hiatus.

The rupee INR=IN was at 88.25 against the U.S. dollar as of 11:05 a.m. IST, little changed from its close of 88.2750 in the previous session.

Asian currency trends were mixed with the Korean won up about 0.4% while the Indonesian rupiah and Thai baht slipped.

The dollar was steady against major peers as investors braced for a week dominated by central bank policy decisions from Washington to Tokyo.

While the Bank of Japan and Bank of England are expected to keep rates unchanged in their policy decisions due on Friday and Thursday, respectively, the Fed is widely expected to cut rates by 25 basis points on Wednesday.

"A 25bp cut is unlikely to be unanimous, with several dissents possible. At least one official is expected to vote for 50 bps, and it is possible at least one other may vote for no change," analysts at ANZ said in a note.

The focus will also be on the Fed's updated economic projections. ANZ expects policymakers to lower its future interest rate projections by 50 bps.

Traders reckon that weakness in the dollar, on the back of dovish commentary from the Fed, could support the rupee but worries over the impact of steep U.S. tariffs on export and portfolio flows are likely to remain a dampener against sharp gains.

Meanwhile, dollar-rupee forward premiums were steady on Monday with the 1-year implied yield at 2.33%, hovering near its highest level since May and up 14 basis points on the month so far.