MUMBAI: The Indian rupee is expected to appreciate slightly at open on Thursday helped by the dollar’s losses after what analysts say is likely to be the last rate hike by the US Federal Reserve.
Non-deliverable forwards indicate rupee will open at around 81.92-81.94 to the US dollar compared with 81.9950 on Wednesday.
The Fed hiked the policy rate by 25 basis points, in-line with expectations while leaving the door open to further rate increases.
Fed Chair Jerome Powell at the press conference said it was “certainly possible” that the US central bank would raise at the September meeting if the data warranted.
Analysts, however, do not reckon that there will more rate hikes. “With two months worth of data to come before the next Fed meeting we suspect evidence of slowing inflation and softer activity won’t make that (a rate hike) necessary,” ING Bank said in a note.
Goldman Sachs pointed out that Fed will be particularly focused on the inflation data, and that it expects the next few consumer price inflation reports to be soft.
Indian rupee likely to fall to start off important week
“As a result, we expect that the FOMC will skip September in order to slow the pace and will then conclude in November that inflation has slowed enough to make a final hike unnecessary,” Jan Hatzius, chief economist at Goldman Sachs, wrote in a note to clients. Odds of a rate hike at the September meeting were at 20%.
Asian currencies were up 0.2% to 0.5% while the dollar index dropped to 100.80. Tracking Asian peers, rupee should see “a healthy opening” after which “it can be reasonably expected it will not do much”, a forex trader at a bank said.
The Reserve Bank of India intervention on Tuesday makes short positions on USD/INR “a bit ill-founded”, he said.
Comments
Comments are closed for this article.