MUMBAI, Sept 20 (Askume) – The Indian rupee was expected to open stronger on Friday, posting a weekly gain, supported by healthy risk appetite and the prospect of further cuts in borrowing costs from the Federal Reserve.
The one-month non-deliverable forward showed that the rupee opened at 83.60-83.62 against the US dollar, while it closed at 83.68 in the previous session. The rupee has strengthened for four consecutive days and is on its way to its best weekly performance in at least four months.
The USD/INR pair has declined this week after spending a long time near the 84 level. Traders said the rupee’s rally is unlikely to last long.
A currency trader at a bank said the USD/INR pair “won’t gain much from a drop or a move higher”.
“In fact, chasing momentum and betting that we will get back to our original range has essentially proven beneficial.”
Risk Rebound
The S&P 500 index rose 1.7%, hitting a record high, a day after the Federal Reserve decided to sharply cut interest rates. Asian stocks rose along with US stocks and currencies also rose.
After this week’s massive 50 basis point rate cut, investors believe there is about a 44% chance that the Federal Reserve will cut interest rates by the same magnitude again at its November meeting. SWAPS expects a rate cut of 75 basis points this year, which is more than the 50 basis points reported by Fed policymakers.
Investors are anticipating that the Federal Reserve will cut interest rates faster than officials expect because of concerns about the US labor market.
ING Bank said in a note that although its forecasts were broadly in line with the Fed’s signals, “we certainly acknowledge that the outlook for the job market is more worrying” and that “there are real risks” and that “the Fed needs to do more, and faster.”
key indicators:
** One month non-payable is Rs. 83.71; 1 month prepaid domestic premium is 10 paise
** US dollar index falls to 100.63
** Brent crude futures fell 0.5% to $74.5 a barrel.
** Ten-year US Treasury yield is at 3.71%
** Foreign investors bought Indian stocks worth $284 million on September 18, according to NSDL data.
** Foreign investors sold Indian bonds worth $25 million on September 18, NSDL data showed.
