The Indian rupee will be helped by a decline in the dollar on Thursday after Federal Reserve Chairman Jerome Powell said a rate hike was unlikely.
Non-deliverable futures indicate that the rupee will open virtually unchanged against the US dollar, up from 83.4250 in the previous session.
“The Fed has not been dovish and at the same time it has not been hawkish to the extent that was feared. You can see it in the way the dollar and US yields fell after Powell’s intervention ” said a bank foreign exchange trader.
The Fed and Tuesday’s “relief” suggest a “slightly” positive bias on the rupee today, he said.
The rupee managed to recover late on Tuesday, after hitting an intraday low of 83.5250.
The Fed, as expected, left its key rate unchanged while acknowledging that there has been no progress toward the 2% inflation target in recent months. The last three inflation figures were higher than expected.
At the post-policy press conference, Powell said he believed monetary policy was “restrictive” and that a rate hike was “unlikely.”
While the Fed committee added to its statement a hawkish acknowledgment of the “lack of progress” on inflation since the start of the year, Chairman Powell delivered a dovish message during his press conference, Goldman Sachs said in a note.
“The most notable aspect […] was Mr. Powell’s opposition to the possibility of a rate hike,” Goldman Sachs said.
The dollar index and U.S. Treasury yields fell after Mr. Powell’s comments. The dollar index fell to 105.72 from 106.20 before Mr. Powell’s conference.
In this context, Asian currencies rose from 0.1% to 0.6%.
US bond yields have fallen. The Fed said it would slow the pace of quantitative tightening starting in June.
KEY INDICATORS: ** Rupee undeliverable in One month at 83.50; One-month onshore forward premium at 7.5 paise ** Dollar index at 105.72 ** Brent up 0.5% at $83.8 a barrel ** US ten-year bond yield at 4. 62% ** According to NSDL data, foreign investors purchased Indian stocks worth a net worth of $0.7 million on April 29.
** According to NSDL data, foreign investors sold $48.4 million worth of Indian bonds on April 29.
