MUMBAI: The Indian rupee is expected to decline on Wednesday as the continued impasse over the US debt ceiling soured risk appetite and boosted demand for the safe-haven dollar.
Non-deliverable forwards indicate rupee will open at around 82.85-82.87 to the US dollar compared with 82.80 in the previous session.
Any negative news, from the rupee point of view, will not have that much of an impact on USD/INR at current levels, a trader said.
“The belief is that RBI will not allow 83 level to be breached and that will hold back speculative dollar long positions,” he added. Asian currencies and equities dropped after concerns over the US debt ceiling triggered the biggest decline in the S&P 500 Index in three weeks.
The dollar index was hovering near 103.50.
Representatives of US President Joe Biden and congressional Republicans failed to reach an agreement during another round of debt ceiling talks on Tuesday with the deadline to raise the borrowing limit approaching.
There are signs that the market is beginning to de-risk with the debt ceiling timeline rolling closer to June, Chris Weston, head of research at Melbourne-based Pepperstone said.
Meanwhile, the Federal Reserve May meeting minutes are due during US trading hours.
The minutes come in the backdrop of debate on whether the US central bank will raise rates again in June or opt for a pause.
Indian rupee likely to remain under pressure on higher US yields
US economic data have signalled a resilient economy and Fed officials have been broadly hawkish, pushing up the probability of a rate hike in June to near 30%. Data on Tuesday was evidence of the resilient US services sector.
A survey from S&P Global on Tuesday showed its flash US Services PMI Index rose to 55.1, the highest reading since April last year.