Rupee to weaken on bets of more Fed Reserve rate hikes, RBI in focus

The non-deliverable forwards indicate that the rupee will open at around 82.85-82.90 to the dollar, compared with 82.7550 in the previous session

Indian rupee, rupee, rupee vs dollar
Reuters MUMBAI
3 min read Last Updated : Feb 15 2023 | 8:54 AM IST

By Anushka Trivedi and Nimesh Vora

MUMBAI (Reuters) - The Indian rupee is expected to decline against the dollar at open on Wednesday after the U.S. inflation reading underscored bets of more Federal Reserve rate hikes.

The non-deliverable forwards indicate that the rupee will open at around 82.85-82.90 to the dollar, compared with 82.7550 in the previous session.

The broad consensus suggests that the Reserve Bank of India will be there to protect the 82.90-83.00 level, turning the first half an hour after open critical, a trader at a Mumbai-based bank said. If public sector banks are not on the offer on USD/INR at open, there could be a quick move higher, the trader added.

U.S. headline consumer inflation index (CPI) rose 0.5% month-on-month in January and core inflation by 0.4%. While the month-on-month change in the headline and core inflation was in line with expectations, the annual rate was above estimates.

"The CPI release is a hiccup to the disinflationary theme that is playing out," DBS Research said in a note.

"While the month-on-month measures were in line with consensus, higher weight should be placed on the year-on-year figure (which faced less distortions from tweaks in seasonal adjustments)."

Interest rate futures have fully priced a 25 basis points hike by the Fed in March and are almost certain of one more in May. The Fed's terminal rate expectations reached to near 5.25%

Fed officials said on Tuesday the U.S. central bank will need to keep gradually raising interest rates to beat inflation and suggested sticky price pressures driven by an upbeat jobs market may push borrowing costs higher than they once thought.

The 2-year Treasury yield rose overnight to above 4.60%, the highest since November. Asian currencies and equities were broadly lower.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 83.00; onshore one-month forward premium at 11.50 paise

** USD/INR Feb futures settled on Tuesday at 82.83

** USD/INR Feb forward premium at 4.0 paise

** Dollar index up at 103.29

** Brent crude futures down 0.4% at $85.3 per barrel

** Ten-year U.S. note yield at 3.75%

** SGX Nifty nearest-month futures down 0.3% at 17,872

** As per NSDL data, foreign investors bought a net $181 mln worth of Indian shares on Feb. 13

** NSDL data shows foreign investors bought a net $91 mln worth of Indian bonds on Feb. 13

 

(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :Reserve Bank of IndiaRupeeFederal Reserve

First Published: Feb 15 2023 | 8:54 AM IST

Next Story