MUMBAI: The Indian rupee is expected to decline against the dollar on Thursday ahead of the crucial US inflation data that will help traders assess the size of the Federal Reserve’s next rate hike.
The rupee is likely to open at 81.55-81.60, compared with 81.4350 in the previous session.
The local unit reached an about six-week high of 81.21 on Wednesday, before slipping in the last hour of trade on likely dollar buying by a public sector company, according to traders.
“The late rally on the dollar yesterday has slightly deflated the rupee’s upside momentum,” a dealer at a Mumbai-based bank said. A decent recovery in the dollar index would also work against the rupee, the dealer said.
The dollar index overnight climbed 0.8% to 110.40, in the wake of losses for US equities. The S&P 500 index retreated more than 2%.
Asian shares followed their US peers lower, and currencies dipped.
Investors await the US inflation data due later in the day that is expected to show that consumer prices rose 0.6% month-on-month in October and by 8% annually.
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The more important core inflation rate is projected to rise 6.5% year-on-year.
The data comes after the US Federal Reserve Chair Jerome Powell signalled that the central bank could opt for small rate hikes at this month’s post policy presser.
The Fed has raised rates by 75 basis points in the last four meetings in its effort to bring down inflation.
Still, futures are pricing in a more than 40% chance that the Fed could yet again raise rates by 75 bps in December.
How these odds shift following the data will shape the dollar’s outlook and that of the rupee and other emerging markets currencies.
Treasury yields dropped overnight with longer-maturity yields falling more than those at the shorter end.
The 2-year yield was hovering near 4.60%.
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