The non-deliverable forwards indicated that the Indian rupee is unlikely to recover more on Thursday despite renewed hopes that the U.S. Federal Reserve may cut interest rates this quarter.
The 1-month non-deliverable forward indicated that the rupeewill open at 86.40 to the U.S. dollar, compared with86.3625 in the previous session.
The local currency had its best day in more than sevenmonths on Wednesday and was among the top-performing Asiancurrencies, helped by December’s narrower-than-expectedmerchandise trade deficit.
The reason that the rupee will not likely rise on Thursday,“is probably the underlying (weak) outlook”, oil prices and the“always present” risk of U.S. tariffs, a currency trader at abank said.
The U.S. Treasury yields fell, equities rallied, and thedollar dipped overnight after a widely measured gauge indicatedthat inflation is slowing again. The U.S. core consumer priceindex (CPI) rose 0.2% month on month in December against a 0.3%increase expected by economists polled by Reuters.
“The details of the CPI report are benign and should givethe Fed more confidence that the recent acceleration ininflation was just a bump,” Morgan Stanley said in a note.
The investment bank said the inflation report increased itswillingness to position for the Fed March rate cut.
Interest rate futures were priced in a slightly higherprobability of a rate cut at the March meeting. At the Jan.28-29 meeting, the futures indicate that the U.S. central bankwill make no changes to the policy rate.
Asian currencies rose on Thursday, receiving relief justdays before U.S. President-elect Donald Trump’s inauguration.Worries over Trump’s trade policies and the jump in U.S. yieldshave undermined the appeal of Asian currencies.
The uptick in Asia currencies “could just be a temporaryreprieve” amid looming U.S. tariff hikes, MUFG Bank said.
One-month non-deliverable rupee forward at 86.68;onshore one-month forward premium at 22.75 paise
Dollar index at 109.02; had hit 110.17 on Monday** Brent crude futures up 0.3% at $82.3 per barrel;rallied 2.6% on Wednesday
Ten-year U.S. note yield at 4.66%, dropped nearly 12 basispoints on Wednesday
As per NSDL data, foreign investors sold a net $897.3mlnworth of Indian shares on Jan. 14
NSDL data shows foreign investors sold a net $78.6mln worthof Indian bonds on Jan. 14
