Indian rupee momentum falters, downside risks re-merge ahead of Powell’s speech

MUMBAI: The Indian rupee is expected to open largely flat to slightly weaker on Friday, with near-term sentiment titled bearish ahead of Federal Reserve Chair Jerome Powell’s speech post market that may offer cues on the interest rate outlook.

The one-month non-deliverable forward indicated the rupee will open in the 87.26-87.30 range versus the U.S. dollar, compared with 87.27 on Thursday.

The rupee rose past the 87 per dollar mark in the last session before coming under pressure throughout the afternoon.

The currency posted its biggest one-day percentage decline in a month, with traders attributing the drop to heavy dollar demand from oil companies and other importers.

Before Thursday’s decline, the rupee had been surprising markets, moving higher despite what most consider a challenging backdrop.

The rupee traded “to an extent like a U.S. tariff-vulnerable currency” on Thursday, a currency trader at a private bank said, pointing to heavy importer dollar demand.

The comment referred to the possibility of Washington imposing additional tariffs of up to 50% on Indian goods from August 27.

The bias on the rupee now is “definitely” towards more declines, he said.

Powell takes centre stage

Jerome Powell’s speech at Jackson Hole later in the day will be scrutinised for clues on the likelihood of a September rate cut and for rest of the year.

The key will be whether Powell pushes back on the more than 80% probability priced in for a rate cut next month. While his recent comments have leaned hawkish, they preceded the weaker July jobs report.

“We expect some modest dovish tilt, though certainly not a 180-degree shift in tone, given the continued uncertainty around the tariff impact on inflation,” MUFG Bank said in a note.