BENGALURU: The Indian rupee is expected to open a tad lower on Thursday after the US Federal Reserve kept interest rates unchanged as expected, but flagged more hikes this year.

Non-deliverable forwards indicate the rupee will open around 82.12-82.14 against the US dollar, compared with a spot close of 82.0950 in the previous session.

The Federal Reserve on Wednesday signalled in new projections that borrowing costs may need to rise by as much as half of a percentage point by the end of this year.

Policymakers see two more 25-basis-point hikes this year.

The hint that this could be a very short lived pause signifies a hawkish message and is an apparent positive for the U.S dollar, said Arnob Biswas, FX research head at SMC Global.

The dollar index dropped to its lowest in four weeks on Wednesday, but recovered and was up 0.2% on Thursday.

The two-year US yield dropped slightly in Asia after rising to its highest since March 10 to 4.8030%.

US stocks ended mixed after the Fed’s announcement, while in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan, were mostly flat.

The Fed outcome might put a cap on further rupee strength in the medium-term, said Srinivas Puni, managing director at QuantArt Market Solutions.

Indian rupee likely higher, awaits Fed rate decision

The Indian rupee had gained for a fourth consecutive session on Wednesday, rising 0.34% and hitting its highest since May 11.

Corporate dollar flows aided the rupee, traders said.

Asian currencies were weak on Thursday, with offshore Chinese yuan extending declines against the dollar and hitting a fresh low since Nov. 2022.