MUMBAI: The Indian rupee is expected to open stronger on Thursday, as markets perceived the US Federal Reserve to be a bit dovish, with investors keeping an eye on domestic equities after late developments in the Adani saga.

The rupee was seen around 81.70 per US dollar in early trades, compared with its previous close of 81.92. It could move in an 81.50-82 band through the session, said traders.

The local currency mirrored the volatility in equities in the previous session, as both markets gave up their post-budget gains once the Adani Group shares resumed their decline. Indian stocks, down about 2.8% since last Wednesday, will be watched further after the Adani Group’s overnight withdrawal of its follow-on public offer.

“Despite dollar weakness and positive risk sentiment, the rupee could come under pressure due to the Adani Group-related developments as equity futures point to a weak start,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

The dollar could be bought initially, and along with foreign investor outflows from equities, could see the rupee fall to 82-levels, he added. Foreign institutional investors withdrew around $3.5 billion from stock markets in January alone.

Meanwhile, the dollar index fell over a percent and Treasury yields declined after the Fed raised rates by an expected 25 basis points and Chair Jerome Powell acknowledged inflation was slowing down.

Indian rupee poised to inch up on fall in US yields; budget, Fed outcome eyed

However, he did signal that interest rates would continue rising and that cuts were not in the offing. It seems the “neutral statement and the news conference have seen the Fed avoiding offering much of a pushback against conviction expectations of a peak in the Fed Funds rate in March,” wrote ING analysts in a note.

Markets are pricing in shallow rate cuts in the later half, which leaves the core, early-year trend of a weaker dollar intact, they added.