MUMBAI: The Indian rupee is expected to decline on Friday, halting a three-day winning streak, after the dollar index reached a two-month high on weak risk appetite and ahead of Federal Reserve Chair Jerome Powell’s speech.
Non-deliverable forwards indicate rupee will open at around 82.62-82.64 to the US dollar compared with 82.5725 in the previous session.
The rupee climbed to a three-week high of 82.3625 on Thursday.
The drop back below 82.50 (after reaching near 82.36) “has more likely than not soured the overall momentum,” a forex trader at a Mumbai-based bank said. “And with the dollar index where it is, you would have to say the bias on the rupee in today’s session is on the downside.”
The dollar index rallied 0.6% on Thursday and advanced more in the Asian session to make it to its highest level in two-and-half months.
The decline in US equities, US Treasury yields resuming their upward march, and data that indicated that the US labour market was holding up well all contributed to the dollar index’s move to above 104.
The S&P 500 Index dropped 1.4% and the 10-year US Treasury yield rose to 4.25%.
Powell’s speech at the Jackson Hole Symposium later in the day is in focus with investors looking for hints on whether interest rates will rise more and what Powell makes of the recent sell on US Treasuries.
“Today’s speech by Powell will get a great deal of scrutiny,” ING Bank said in a note “ …the majority view being that he will tread a cautious path with respect to any further potential tightening, looking for confirmation from the totality of the data before committing to any additional hikes.“
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