MUMBAI: The Indian rupee is expected to open higher on Monday, boosted by a broad decline in the US dollar amid upbeat risk appetite and expectations of the Federal Reserve’s interest rate cuts.
The 1-month non-deliverable forward indicated that the rupee will open at 83.86-83.88 to the US dollar, compared with 83.94 in the previous session.
The Korean won and the Malaysian ringgit led Asian currencies higher to begin the week, climbing 1%. The dollar index extended Friday’s 0.5% drop while Asian shares advanced.
“Decent sized” moves in Asia have “taken (the level of) 84 (on dollar/rupee) out of the view for the moment,” a currency trader at a bank said.
“The question is what happens after the opening dip. Based on recent sessions, the odds are in favour of the dip not holding up.”
The dollar struggled despite data indicating a recovery in US consumer confidence.
US consumer sentiment rose in August, while inflation expectations remained unchanged over the next year and beyond, a survey showed on Friday.
Indian rupee holds above record low
The consumer confidence data follows healthy US retail sales and a smaller-than-expected rise in jobless claims, allaying fears of an economic slowdown spurred by the weak July US non-farm payrolls data.
Investors have dialled back expectations of a larger 50 basis points rate cut by the Federal Reserve at next month’s meeting.
Odds of 50 bps rate cut are now at just 1-in-4 compared to more than 50% after the payrolls data. Fed Chair Jerome Powell’s comments at the annual Jackson Hole Economic Policy Symposium on Friday will provide cues on the timing and size of rate cuts.
The Jackson Hole event has in the past been a stage for future policy.
Powell could provide a stronger signal that the Fed will proceed with rate cuts at the September meeting amid data showing disinflation, MUFG Bank said in a note.
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