MUMBAI, Oct 15 (Reuters) – The Indian rupee is poised to open a touch firmer on Wednesday, taking comfort from a softer dollar after U.S. Federal Reserve Chair Jerome Powell struck a dovish tone that reinforced bets more interest rate cuts were on the way.
The one-month non-deliverable forward indicated the rupee will open in the 88.74-88.76 range versus the U.S. dollar, having settled at 88.7975 on Tuesday.
Powell kept the door ajar for further rate cuts and said the Fed’s balance sheet unwind could soon hit pause.
He flagged that the labour market is losing momentum, with hiring and payroll additions moderating, and warned that delayed policy moves could amplify job losses given the longer lags now at play.
MUFG Bank called Powell’s remarks dovish, saying that his comments had firmed up expectations for a couple of additional rate cuts this year.
Futures have locked in a 25 basis-point rate cut for this month, with odds high for a repeat reduction in December.
The dollar index slipped further in Asia on Wednesday after Tuesday’s pullback. Regional equities and U.S. futures advanced, while the 10-year Treasury yields dropped to near 4%.
Asian currencies rose 0.2% to 0.4%.
The broader Asia tone should provide the rupee a bit of a tailwind at open, said a trader with a private sector bank.
“However beyond that, it’s the same story — narrow ranges, importer bids, and the RBI. The difference today may be that the RBI won’t be needed much to defend the 88.80 level,” the trader said.
Over the last several sessions, the Reserve Bank of India has been seen selling dollars to prevent the rupee from dipping towards the 89 level, keeping volatility unusually muted.
With Asia in good shape and risk sentiment positive, traders expect the rupee to hold up on Wednesday without much help from the RBI.
** One-month non-deliverable rupee forward at 88.86; onshore one-month forward premium at 13.25 paise
** Dollar index down at 98.85
** Brent crude futures down 0.3% at $62.2 per barrel
** Ten-year U.S. note yield at 4.01%
** As per NSDL data, foreign investors bought a net $400.5 million worth of Indian shares on Oct. 13
** NSDL data shows foreign investors bought a net $26.4 million worth of Indian bonds on Oct. 13 (Reporting by Nimesh Vora; Editing by Subhranshu Sahu)
