MUMBAI: The Indian rupee is expected to open marginally higher on Thursday on the back of a fall in US Treasury yields after a slightly dovish stance from the Federal Reserve.
Non-deliverable forwards indicate rupee will open at around 83.24 to the US dollar compared with the close of 83.28 in the previous session.
The currency reached a record low of 83.2950 in the dying minutes of Wednesday’s session. On the interbank order matching system, the rupee had dropped to 83.3675.
“It will be a relief (for the rupee) that at least at open there will no fallout of what happened late yesterday,” a forex spot dealer at a bank said.
“It looks like that after the brief excitement yesterday, we will be back to a quiet day.”
India rupee falls to record low
The Fed kept the policy rate unchanged at 5.25-5.50%, in line with expectations. However, some analysts reckon that the tone of Fed Chair Jerome Powell’s press conference was dovish.
“We saw the FOMC (Federal Open Market Committee) statement and the press conference slightly dovish overall, and the market appeared to agree,” Goldman Sachs said in a note.
Goldman Sachs pointed out that the FOMC statement acknowledged the recent tightening in financial conditions, and that Powell laid out conditions under which the tightening would displace the need to hike.
Powell further clarified that above-potential growth on its own would not be enough to warrant another rate hike, downplaying the 1% jump in one-year Michigan inflation expectations, Goldman Sachs said.
The 10-year US Treasury declined to 4.71%, a near 16-basis-point fall from what it was prior to the FOMC statement.
The 2-year US yield dropped below 5% and the odds of a Fed rate hike at the December meeting were down to 15%. Asian currencies and equities rallied.
The Korean won climbed 1%.
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