MUMBAI: The Indian rupee is expected to open higher on Friday as the US dollar slid even further on bets that the Federal Reserve is near halting its rate hike cycle.
Non-deliverable forwards indicate rupee will open at around 82 to the US dollar compared with 82.0725 in the previous session.
The rupee on Thursday managed to strengthen past 82, but was unable to sustain on forward dollar demand from importers, some traders said.
Two of them said it was possible that the Reserve Bank of India (RBI) was on the bid side on USD/INR.
It will “not surprise anybody if the RBI bought dollars yesterday”, a forex dealer at a bank said, adding that he was betting that the currency would hold at 82.
The dollar’s decline following the lower-than-expected US June inflation data on Wednesday showed no signs of pausing. The dollar index was down to 99.64, the lowest since April 2022. The gauge has tumbled 2.5% this week.
The moves witnessed across assets on Wednesday continued overnight.
The dollar weakened, US yields dropped, and US equities marched higher.
The 2-year US yield is now 50 basis point below last week’s high and the S&P 500 Index is at a 15-month high.
US producer price data reinforced expectations that the Federal Reserve is nearly done with the rate hiking cycle.
Indian rupee likely to inch up as dollar hits two-month low
Coupled with the below-expectations CPI data, “this has helped to cement the disinflation narrative within markets and make them question how many more hikes will be needed,” ANZ said in a note.
Investors are now betting that the US Federal Reserve will deliver its last rate hike in the current cycle at the July 25-26 meeting.
After that, the Fed is expected to remain on hold til the first quarter of next year.
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