MUMBAI: The Indian rupee is expected to open higher on Thursday, after the US Federal Reserve maintained their forecast for three interest rate cuts this year, spurring a drop in the dollar and Treasury yields.
Non-deliverable forwards indicate the rupee will open at around 83.06-83.08 to the US dollar compared with 83.1575 in the previous session.
The local currency is on a four-day losing run that had taken it to the weakest in two months.
The rupee “will catch a bit of relief” at open “based on the reaction to the Fed” and then it will be about whether the dollar demand witnessed in recent days persists, a currency trader at a bank said.
“On balance, I would say these are good levels to sell (USD/INR).”
The Fed’s median dot plot indicated that policymakers expect three rate cuts this year, unchanged from what was forecasted in December. Following the last two higher US inflation readings, there was a risk that the dot plot would adjust higher and indicate two rate cuts, analysts had said prior to the Fed decision.
That the Fed kept the 2024 rate cut rejections at three was “modestly dovish”, ING Bank said in a note.
The median Fed dot plot for 2024 was unchanged despite a 0.2% increase in the median 2024 core PCE inflation.
Indian rupee edges down pressured by weaker Asian peers, high oil prices
“Our interpretation is that Fed Chair Jerome Powell and a narrow majority of the FOMC (Federal Open Market Committee) feel strongly about not delaying cuts for too long and are targeting the June meeting for the first cut,” Goldman Sachs said in a note.
Odds that the Fed will cut rates at the June meeting rose to 3-in-4.
The dollar index dropped on Wednesday and added to the losses in Asia.
The 2-year US Treasury yield was 10 basis lower than before the Fed decision.