MUMBAI, Sept 12 (Askume) – The Indian rupee is likely to remain mildly under pressure on Thursday as easing U.S. inflation dashed expectations of a sharp interest rate cut by the Federal Reserve next week.
The rupee opened at 83.98-83.99 against the dollar in one-month non-deliverable forward, while in the previous session it was at 83.9775.
The currency risks falling below last week’s low of 83.9850.
“With US inflation now over, the Fed may cut interest rates by 25 basis points next week,” said Srinivas Punni, managing director at forex advisory firm QuantArt Market Solutions.
“Nevertheless, with a total of 100 basis points of rate cuts expected in 2024, meaning a 50 basis point cut in the November/December period, the dollar forecast now depends on whether the Fed will follow the market line, and in fact, make an ‘I will’ rate cut.”
The dollar is currently “in balance” while the rupee will remain range bound at least until the Fed’s September 17-18 meeting.
US Treasury yields rose as US inflation rose more than expected as investors lowered hopes for a sharp interest rate cut by the Federal Reserve. US core inflation rose 0.3% quarter-on-quarter, while economists polled by Askume had expected 0.2%.
Traders unanimously agreed to cut interest rates by 25 basis points at the Federal Reserve’s September meeting as monthly US core inflation data came in slightly higher than expected, Westpac said in a report.
The futures market currently predicts an 85% chance of a 25 basis point rate cut at next week’s meeting. The chance of a 50 basis point rate cut has dropped to 15%, roughly half of what it was before the inflation data.
The dollar index edged higher in Asian trade, supported by rising U.S. Treasury yields. Most Asian currencies fell.
key indicators:
** One month non-payable is Rs. 84.07; 1 month prepaid domestic premium is 9 paise
**The USD index fell to 101.76 **Brent crude futures rose 0.2% to $70.8 a barrel
** Ten-year US Treasury yield is at 3.67%
** Foreign investors bought Indian shares worth $352.8 million on September 10, according to NSDL data.
** Foreign investors sold Indian bonds worth $96.6 million on September 10, according to NSDL data.
