MUMBAI: The Indian rupee is likely to open lower on Tuesday, tracking the fall in other Asian currencies and on stalling upside momentum.
Non-deliverable forwards indicate rupee will open at around 83.12-83.14 to the US dollar compared to its previous close of 83.06.
The rupee climbed to a three-month high of 82.9050 on Monday, but was unable to sustain it and closed slightly lower.
“The rupee intraday turnaround and finishing at the day’s low suggest to me that the momentum created from the move on Friday has been nullified,” an FX trader at a bank said.
“I would think that a move back to the area of 83.30-83.35 is quite likely.” Asian currencies were mostly weaker on Tuesday, following push back from more Federal Reserve officials on rate cuts.
Chicago Fed President Austan Goolsbee said the Fed is not precommiting to cutting interest rates soon, and the jump in market expectations that it will do so is at odds with how the US central bank functions.
Fed Cleveland President Loretta Mester said financial markets had got “a little bit ahead” of the central bank on when to expect interest rate cuts, the Financial Times reported on Monday.
Four policymakers have now sought to manage expectations around rate cuts, after the market priced in aggressive cuts next year following what was seen a dovish Fed policy outcome.
Indian rupee posts best day in over 8 months aided by dollar inflows
“The last few days of market action, before volumes dry up for Christmas, should continue to revolve around the “tug of war” between Fed officials trying to temper speculation and investors who have instead seen a validation of dovish bets from last week’s dot plot projections,” ING Bank said in a note.
The Bank of Japan policy decision will be the key event for Asian currencies on Tuesday.
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