MUMBAI: The Indian rupee at open on Thursday will contend with a slide in Asian peers, US Federal Reserve leadership upheaval, and soft US inflation data that slightly strengthened expectations of a rate cut at the Fed’s September meeting.
The 1-month non-deliverable forward indicated that the rupee will open flat-to-slightly weaker versus the US dollar from 85.94 on Wednesday.
The The dollar index whipsawed Thursday, dropping on speculation that President Trump would sack Fed Chair Jerome Powell, before trimming losses after the report was denied.
Trump kept up his pressure on the central bank to cut rates.
Trump has been vocal in his frustration with Powell for not cutting rates, which he thinks should be much lower.
Trump confirmed that he had floated the idea with Republican lawmakers to fire the Fed chief.
Investors were rattled last week by signals that the White House was paving the way to dismiss Powell — a move that would likely spark a sharp market backlash. ING Bank said in a note that the firing of Powell remains a low-probability event.
However, Wednesday’s market action showed how investors are likely to react if it does materialize - short-term US yields would fall, the dollar would weaken, equities would decline, credit spreads would widen, and long-dated Treasury yields would rise, ING added.