Indian rupee eyes mild relief with Asian peers buoyed by 'modestly' dovish Fed
- The Indian rupee is expected to open in the 95.14-95.18 range
The Indian rupee is expected to strengthen against the dollar following the Federal Reserve's "modestly dovish" stance, providing relief amidst high oil prices and ongoing RBI intervention.
- Federal Reserve's "modestly dovish" policy decision.
- Impact of surging oil prices on the rupee.
- Reserve Bank of India's intervention strategies.
MUMBAI: The Indian rupee is likely to inch higher at Thursday’s open, tracking most Asian currencies after the Federal Reserve’s policy decision and Chair Warsh’s subsequent comments were read as modestly dovish by parts of the market.
The Indian rupee is expected to open in the 95.14-95.18 range, per traders, having settled at 95.22 to the dollar on Wednesday.
The Korean won led Asian currencies higher, boosted by a drop in near maturity US Treasury yields after the Fed left interest rates unchanged, in line with expectations.
Two policymakers dissented in favour of a hike. Markets had anticipated more hawkish dissents, and the smaller-than-expected number was seen as a dovish surprise by some analysts.
During the press conference, Chair Kevin Warsh repeatedly noted financial conditions have tightened, though he stopped short of describing them as restrictive, leading markets to interpret the hold to be slightly dovish, Morgan Stanley said in a note to clients.
The Fed’s expected hold has done little to shift expectations for December, with markets pricing in an over 80% probability of a rate hike.
The 2-year US Treasury yield dropped while yields on longer maturities rose. The dollar index dropped.
Relief for rupee
The dollar’s weakness against Asian currencies should offer the rupee relief at a time when surging oil prices are keeping up pressure on the currency. Brent crude is trading near $115 a barrel.
The rupee has repeatedly relied on Reserve Bank of India intervention to limit deeper losses in recent sessions, a pattern evident again on Wednesday when the central bank sold dollars ahead of the market open.
The 95.25-95.30 area remains an important resistance level for the dollar/rupee pair, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
A sustained break above it could invite further dollar buying, while continued RBI intervention will keep the pair range-bound despite the underlying pressure on the rupee, he added.