MUMBAI, Sept 13 (Askume) – The Indian rupee was expected to gain on Friday after media reports suggested the Federal Reserve may cut interest rates by 50 basis points next week.
One-month non-deliverable forwards suggest the rupee may open at 83.92-83.94 against the dollar, as against 83.9650 on Thursday.
Media reports from the Financial Times and the Wall Street Journal said that the Federal Reserve’s decision to cut interest rates by 25 basis points or 50 basis points next week may be certain, which may put pressure on the US dollar.
This surprised traders, who had expected a deeper rate cut after the release of the US employment and inflation report in August. According to the CME FedWatch tool, the probability of a 50 basis point rate cut has increased from 14% to 40%.
Although the US producer price index in August was slightly higher than expected and initial jobless claims were in line with expectations, the possibility of a 50 basis point interest rate cut has increased.
The US dollar index fell to near 101, less than half a percent from its year-to-date low.
The dollar was under pressure as markets turned “slightly” toward a 50 basis point interest rate cut by the Federal Reserve next week, ANZ Bank said in a report.
The bank believes that the Fed will not cut interest rates by 50 basis points, but rather by 25 basis points, and added that “the fundamental financial and economic conditions do not indicate that the interest rate reduction cycle will resume more forcefully.”
Rupee remains stable at 84
Traders said the rupee on Thursday again avoided falling below the 84 mark due to the intervention of the central bank. After more than a month, the central bank has managed to prevent the rupee from falling below 84.
key indicators:
** One month non-payable rupee advance is 84.03; Domestic 1 month advance premium is 8.50 paise
**USD index fell to 101.02
** Brent crude futures rose 0.4% to $72.3 a barrel.
** 10-year US Treasury bond yield is 3.65% and Indian 10-year Treasury bond yield is 6.81%
** Foreign investors bought Indian shares worth $341.8 million on September 11, according to NSDL data.
** Foreign investors sold Indian bonds worth $22.3 million on September 11, NSDL data showed.
