MUMBAI: The Indian rupee is likely to open little changed to the US dollar on Wednesday, with traders weighing comments from Federal Reserve Chair Jerome Powell and awaiting the Reserve Bank of India’s policy decision.
The non-deliverable forwards indicate an opening of 82.68-82.74 for the rupee, compared with 82.70 in the previous session. The RBI is widely expected to raise rates by 25 basis points at around 10 a.m. IST.
Many economists expect the central bank to signal a pause to the current rate hike cycle, while a few expect a change in stance from the withdrawal of accommodation to neutral. We doubt RBI will have a major impact on the rupee, a trader at a Mumbai based bank said.
If there is a change in stance, it will be negative at the margin for the rupee, more so in the context of what is happening to US yields right now, he added.
Powell said on Tuesday that the robust jobs data released on Friday affirms that the central bank has some way to go on raising rates.
The Fed chief doubled down on statements last week that disinflation had begun, saying he expects significant declines in inflation this year.
Some market participants had expected Powell to adopt a more hawkish stance after the jobs report blew past expectations. Powell was “not materially more hawkish” than he was after the recent Fed decision, ING Bank said in a note.
Indian rupee seen struggling to rise much in coming months
Powell chose not to ratchet up the hawkish rhetoric on the back of one data print, ING added. US equities cheered Powell’s comments, but Treasury yields continued to spiral up.
The dollar index softened a bit. Powell was not the first to express surprise at the jobs report, with some of his colleagues also nodding to the possible need for higher interest rates.
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