MUMBAI: The Indian rupee is likely to decline on Wednesday, weighed down by the rise in the US dollar ahead of the key meeting of central bankers in Jackson Hole later this week.
Non-deliverable forwards indicate the rupee will open at around 82.98-83.02 to the US dollar, compared with its close of 82.9350 in the previous session.
It “was always expected to be a challenge” for the rupee to hold above 83, a forex trader at a Mumbai-based bank said.
The rupee “will spend more time around 83 and will not do much” till we hear from Fed Chair Powell, he said.
Powell’s speech on Friday at Jackson Hole, Wyoming, will be keenly watched for clues on the outlook for interest rates.
Given the recent jump in US Treasury yields and resilient US economic data, investors will be looking for clues on whether more rate hikes will be needed to ward off the inflation threat and clarity on how long rates are likely to remain higher.
Powell’s comments will likely provide clarity on what he thinks is the reason for the move on US Treasury yields, ING Bank said.
The bottom line, for us, “is that it looks too early” for the Fed to sound the all-clear on inflation and the dollar probably remains higher, ING Bank said.
The dollar index hit an over two-month-high of 103.71 in the New York session on Tuesday. Most Asian currencies dropped on Wednesday, with the attention squarely on the yuan.
China’s central bank has been taking steps to contain the decline in the currency.
The offshore yuan was just above 7.30 to the dollar.
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