MUMBAI: The Indian rupee is expected to inch higher at open on Thursday, helped by a slightly softer dollar and favourable momentum, though likely resistance at a key psychological level will cap gains.
The 1-month non-deliverable forward indicated the rupee will open in the 87.02 to 87.04 range versus the U.S. dollar, compared with 87.0650 on Wednesday.
Over the past week, the rupee has managed to shake off the pressure it has faced, though traders note there has been no single clear catalyst behind the recovery.
Instead, they cite that a mix of stretched bearish bets and friendlier risk sentiment has allowed the currency to recover.
The rupee climbed to a multi-week peak of 86.92 on Tuesday and managed to sustain most of that advance through Wednesday.
The bias has shifted “slightly” in favour of the rupee, a currency trader at a Mumbai-based bank said.
“The big question is how sustainable this move will be, and most remain doubtful,” he said. “The fact that it managed to hold around 87 yesterday should temper those doubts to an extent.”
Dollar soft, Asia mixed
The dollar index slipped on Wednesday, while Asian currencies traded mixed on the day.
Attention in FX markets is fixed on Federal Reserve Chair Jerome Powell’s speech on Friday, with investors largely convinced the Fed will cut rates next month.
While Powell’s recent remarks have been hawkish, those came before the weak July employment data that strengthened expectations for a 25 basis points cut at the September 16–17 meeting.
“At Jackson Hole, Powell faces a immediate challenge. A September rate cut is fully priced by financial markets. Does he push back?,” ING Bank said in a note.
Minutes from the Fed’s July meeting showed the two dissenters who wanted rate cuts had little support from other policymakers.
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