MUMBAI: The Indian rupee is expected to decline slightly at open on Wednesday, weighed by a rise in the US dollar after robust US labour market data made it less likely the Federal Reserve will cut interest rates in March.
Non-deliverable forwards indicate the rupee will open at around 83.12-83.14 to the dollar, compared with 83.1050 in the previous session. The rupee’s intraday range in the last four sessions has been just 2 to 6 paisa.
The rupee “is back to the mode in which nothing will happen”, a forex trader at a bank said. The drop at open “will not amount to much and at maximum, we could see a move to 83.18,” he said.
The probability of a Fed rate cut in March was down to 44% after US job openings unexpectedly rose in December and data for the prior month was revised higher, signalling the labour market remains robust.
Moreover, the US headline Conference Board consumer confidence rose to a two-year high.
A month back investors were nearly certain that the Fed would begin its rate-cut cycle in March. However, data since then, that has indicated the US economy and the labour market are holding up well, has tempered rate cut expectations.
“The market further priced out the chances of a March rate cut ahead of tonight’s FOMC (Federal Open Market Committee) meeting,” ING Bank said.
Indian rupee flat ducking uptick in Asian peers, forward premiums inch up
The Fed is expected to make no changes to the policy rate at that meeting, with policymakers wanting more progress on inflation. The focus will be on what Chair Jerome Powell will say about the March rate cut.
The dollar index was up in Asia, while Asian currencies were down 0.1% to 0.5%. Asian shares and S&P 500 Index futures declined.
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