MUMBAI: The Indian rupee is likely to open weaker on Wednesday, pressured by the dollar index rallying after U.S. President Trump walked back his threat to oust the Federal Reserve Chair and on hopes that U.S.-China trade tensions may ease.
The 1-month non-deliverable forward indicated that the rupee will open at 85.24-85.26 to the U.S. dollar compared with 85.1875 in the previous session.
The Indian rupee has been knocking on the door of 85 in the last two sessions but has not been successful in breaking through. While the near-term trajectory for the rupee is upward, the currency has to move beyond the 84.90–85.00 zone to fuel a large advance, a currency trader at a bank said.
He added that flows remain favourable, with foreign equity buying and more exporters stepping in to hedge.
Dollar revival
The dollar index surged 1.5% on Tuesday, recovering from a more than three-year low, after Trump assured markets he has no plans to dismiss Federal Reserve Chair Jerome Powell.
“I have no intention of firing him,” Trump told reporters in the Oval Office on Tuesday.
“I would like to see him be a little more active in terms of his idea to lower interest rates,” he added.
Despite the reassurance, analysts remained cautious.
Indian rupee winning streak threatened by yuan losses, technical hurdle
“It remains to be seen if Trump will flip again in his next set of comments or social media tweets,” MUFG Bank said in a note.
Further support for the dollar came from U.S. Treasury Secretary Scott Bessent, who said he believes there will be a de-escalation in U.S.-China trade tensions.
U.S. equities rallied on Tuesday and futures indicated more upside for the U.S. Treasuries rose alongside equities.
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