Rupee likely to fall on hawkish Fed Reserve comments, higher oil prices

By Anushka Trivedi and Nimesh Vora

MUMBAI (Reuters) - The Indian rupee is expected to decline against the U.S. dollar on Thursday, weighed by hawkish comments from Federal Reserve officials and higher oil prices.

The non-deliverable forwards indicated the rupee would open around 82.60-82.62 per dollar, compared with the 82.4925 closing in the previous session.

Fed officials on Wednesday said more interest rate rises are on the cards in the central bank's efforts to bring down inflation. Moving to a rate of between 5.00% and 5.25% "seems a very reasonable view," New York Fed President John Williams said.

Fed Governor Christopher Waller said the U.S. central bank will have to keep a tight monetary policy stance for some time. Minneapolis Fed leader Neel Kashkari said he believes the rate will need to go as high as 5.4% or even higher if the data called for it.

Fed Governor Lisa Cook emphasized that further hikes are needed in gradual steps.

"The Fed rhetoric is now clearly at odds with market pricing of rate cuts later this year," DBS Group Research said in a note.

Fed fund futures are pricing in rate cuts of about 30 to 35 basis points after peaking at around 5.12% in July.

The Korean won and Indonesian rupiah were down 0.2% each, while the offshore Chinese yuan was hovering just above 6.80 to the dollar.

The 10-year U.S. yield was last at 3.6144% after reaching 3.692% last night, its highest since Jan. 6. It had hit 3.33% a day before the U.S. jobs report.

Brent crude futures inched higher in Asia trading, adding to its overnight advance. Oil prices are up over 6% in the last three sessions.

For the rupee, the 82.90 level remains the key on the downside, and the odds are that we could see narrow intraday ranges for the time being, said a foreign exchange trader.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 82.71; onshore one-month forward premium at 12 paise

** USD/INR NSE Feb futures settled on Wednesday at 82.6350

** USD/INR forward premium at 7 paise

** Dollar index at 103.38

** Brent crude futures up 0.2% at $85.3 per barrel

** Ten-year U.S. note yield at 3.62%

** SGX Nifty nearest-month futures up 0.1% at 17,905

** As per NSDL data, foreign investors sold a net $266.9 mln worth of Indian shares on Feb. 7

** NSDL data shows foreign investors sold a net $99.6 mln worth of Indian bonds on Feb. 7

 

(Reporting by Anushka Trivedi and Nimesh Vora; Editing by Dhanya Ann Thoppil)