MUMBAI: The Indian rupee will open higher on Thursday after weak US retail sales and cooling US inflation made it more likely that the Federal Reserve will cut rates later this year.
Non-deliverable forwards indicate the rupee will open at 83.42-83.44 to the US dollar, up from 83.50 in the previous session. US consumer prices increased less than expected in April, fuelling hopes that the Fed will reduce borrowing costs, most likely at the September meeting.
US retail sales were unexpectedly flat in April against the expected 0.4% increase, providing one more reason to bet that the Fed will reduce interest rates. Control retail sales fell 0.3% on-month. Control retail sales, which are used to help calculate GDP, have been negative in three of the first four months of this year, ANZ Bank pointed out.
The dollar index and the 10-year US Treasury yield were down to their lowest in more than a month, while US equities rallied. Futures are pricing in two interest rate cuts this year.
The Korean won and the Thai baht led Asian currencies higher, climbing 1.5% and 0.8%, respectively. Asian equities followed their US peers higher and futures on the S&P 500 Index rose more.
“Well, we have a number of positive cues (for the rupee). While you will obviously not expect to see the kind of move that Asia has, let’s see if we can at least move past the 83.35-83.40 region,” an FX trader at a bank said.
Indian rupee ends moderately higher
The upside in the rupee is expected to be capped by the ongoing nervousness about the India election outcome, which is prompting foreign outflows.
Foreigners have withdrawn more than $3 billion from Indian equities in nine sessions in May so far, NSDL data shows.
Comments
Comments are closed for this article.