Indian rupee set to weaken on extended climb in dollar, US yields after Fed verdict

MUMBAI: The Indian rupee is poised to open lower on Friday, dragged by lingering strength in the dollar and higher US Treasury yields following the mixed Federal Reserve outcome, while the previous session’s unfavourable tone will further weigh on sentiment.

The 1-month non-deliverable forward indicated the rupee will open in the 88.20-88.22 range versus the U.S. dollar, compared with 88.1275 in the previous session.

The rupee came under renewed pressure on Thursday after a brief respite in the prior sessions, failing to sustain its climb past the 88 mark.

The local unit’s inability to sustain its advance underscored the fragile sentiment around the currency amid dollar strength, traders said.

Price action on the rupee “remains whippy within a broad 88 handle”, a currency trader at a bank said. Just when the setup had begun to look constructive for the rupee, momentum quickly turned against the currency.

Meanwhile, in a positive development for the rupee, Bloomberg Index Services is seeking views from investors on whether Indian government bonds should be included in its flagship global aggregate index, according to a notice sent to investors seen by Reuters.

The dollar index inched up in Asian hours to near 97.50, extending a 0.7% advance over the past two sessions.

The dollar had initially slipped after the Fed’s 25-basis-point rate cut on Wednesday and projections that signalled more reductions ahead.

However, it soon found support from U.S. Treasury yields, which like the dollar, regained after their post-Fed decline.

Analysts said the move reflected Fed Chair Jerome Powell’s press conference, which they said sounded less dovish than the projections suggested.

U.S. jobless claims data out on Thursday contributed to the selloff in Treasuries.

The number of Americans filing new applications for unemployment benefits fell last week, reversing the prior week’s jump.