MUMBAI: The Indian rupee is expected to open higher on Thursday, supported by wagers of a US Federal Reserve pause next week and the much higher-than-expected local GDP print.
Non-deliverable forwards indicate rupee will open at around 82.64-82.66 to the US dollar compared with 82.7225 in the previous session.
India’s economic growth accelerated to 6.1% in the March quarter, data out on Wednesday showed, much higher than the 5% reading expected by economists polled by Reuters.
The data “will definitely not hurt” the recent revival that has been witnessed on the equity portfolio flows side, a salesperson at a bank said. “It looks like a slow downward drift to 82.50 (on USD/INR pair) is highly likely.”
Meanwhile, expectations regarding what the Fed will do next week changed following comments by two policymakers who prefer not raising rates next week.
Fed Governor and vice chair nominee Philip Jefferson said “skipping a rate hike” at a coming meeting would allow the Fed to see more data before making decisions on additional policy firming.
Philadelphia Fed President Fed Harker said he was increasingly in the camp of “thinking that we really should skip”.
“The key message is that more time is probably needed to assess incoming data,” DBS Research said in a note.
“We agree. Having delivered one of the most aggressive hikes in history, it is probably more prudent to take things slow.”
Risks on Indian rupee seen on the downside in wake of yuan’s plunge
The probability of a rate hike next week dropped to near 1-in-3 from about 2-in-3, according to the CME FedWatch Tool. US yields declined. Tracking the fall in US yields, most Asian currencies rose The Chinese yuan, having fallen to near 7.1340 in the US trading session, recovered to 7.1116.
On the topic of the US debt ceiling, the focus now turns to the Senate after it was passed by the House of Representatives.
Comments
Comments are closed.