MUMBAI: The Indian rupee is tipped to open higher against the U.S. currency on Thursday, tracking a pullback in the dollar index and a decline in oil prices to over seven-month lows.
The rupee is expected at around 79.70 in initial trades, up from 79.90 in the previous session.
The dollar index inched lower in Asia trading to near 109.75, adding to Wednesday’s decline. Asian currencies rose, halting the recent slide.
The fall in Treasury yields and a better risk appetite dented demand for the dollar. The S&P 500 Index surged 1.8% overnight while the 10-year Treasury yield fell about 11 basis points from the highs.
Meanwhile, Brent crude futures slipped to the lowest level since February on Wednesday, after dropping more than 5% on concerns over demand.
Oil prices are now down more than 20% since the beginning of August, fuelled by fears of a slowdown in China and policy tightening by the Federal Reserve and other central banks.
Indian rupee may open tad lower after dollar index hits 2-decade high above 110
Concerns over the global economic outlook are “in a way” helping the rupee, as it is leading to a “sizeable” pullback in oil and other commodities, a trader at a Mumbai-based bank.
“Obviously, growth concerns are likely to lead to portfolio outflows from emerging markets, but since the turn of July that has not been a problem for India.”
Foreign investors poured in more than $6 billion into Indian equities in August, according to data from NSDL website. Investors have bought about $330 million, thus far this month.
Global markets will now shift focus to on Fed Chair Jerome Powell’s speech later in the day. Ahead of Powell’s speech, policymakers maintained a hawkish tone. Boston Fed President Susan Collins said that bringing inflation back down to 2% is the Fed’s main job, and while it has raised rates significantly, “there’s more to do.”
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