MUMBAI: The Indian rupee is poised to open higher against the US dollar on Tuesday, tracking more broad losses on the greenback, as traders bet that the Federal Reserve could opt for smaller interest rate hikes.

The rupee will likely open at around 82.25-82.30. The local currency ended at 82.36 on Monday, marking its best session in two months.

“The rupee had the tailwind of a struggling dollar, but we do not think it will be enough to take it above the 82-level,” a trader at a Mumbai-based bank said.

In fact, USD/INR could run into a “mountain of support” at around 82.20 itself, he added.

The dollar index dropped below 103 overnight to its lowest level since June, extending its US jobs data-prompted slide.

The reading showed a slowdown in wage growth, which fuelled hopes that inflation is slowing down and the Fed would dial back on its hawkish stance.

ING Bank said in a note that after the US jobs data, Fed futures have reverted to pricing in a peak rate of less than 5%.

The current implied peak comes in June this year at 4.93%.

The focus now shifts to Fed Chair Jerome Powell’s speech later in the day and to the critical US inflation on Thursday.

Fed policymakers said on Monday the inflation data will help them decide whether they can slow the pace of interest rate hikes at their upcoming meeting to 25 basis points.

Indian rupee has best session in two months, climbs above key level

Meanwhile, Asian currencies were trading mostly higher, but the advance was more muted than on Monday.

Asian shares were mixed, while US equity futures inched lower.

Overnight, US shares slipped overnight, unable to sustain an earlier rally.