Market News
Fed rate cut hopes, RBI support shield rupee from US tariff drag - REUTERS
MUMBAI, Aug 28 (Reuters) - The Indian rupee is set to open largely unchanged to slightly higher on Thursday, with bets for a Federal Reserve rate cut and hopes of the Reserve Bank of India's (RBI) intervention offsetting the drag from steep U.S. tariffs.
The 1-month non-deliverable forward indicated the rupee will open in the 87.62-87.68 range versus the U.S. dollar, compared with Tuesday's level of 87.68. India's financial markets were shut on Wednesday for a local holiday.
Get the latest news from India and how it matters to the world with the Reuters India File newsletter. Sign up here.
The RBI likely stepped in on Tuesday to curb losses after the rupee came under pressure when Washington confirmed additional tariffs on Indian goods, traders said
The rupee had briefly dipped to an intraday low of 87.80, before likely RBI dollar sales kicked in, preventing a test of the all-time low at 87.95.
"For now, (the) RBI has effectively drawn a line in the sand near the highs, capping dollar/rupee," a currency trader at a Mumbai-based bank said.
"That said, the bias stays topside and that's unlikely to flip anytime soon."
The rupee will have to contend with likely higher dollar hedging demand from importers, long dollar positioning interest from speculators and potential equity-related outflows.
Advertisement · Scroll to continue
Report This Ad
Foreign investors offloaded more than $700 million worth of Indian shares on Tuesday, underscoring the risk-off tone that dragged equities down 1%.
ASIA INCHES UP
Most Asian currencies rose, supported by bets on a Fed rate cut next month. New York Fed President John Williams told CNBC on Wednesday that a September move was possible, noting that "every meeting is, from my perspective, live."
The comment came after Fed Chair Jerome Powell's dovish pivot at Jackson Hole last week.
Traders currently lay around 84% odds of a quarter-point rate cut next month, pricing in a cumulative 56 basis points of cuts this year.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 87.74-87.78; onshore one-month forward premium at 12 paise
** Dollar index down at 98.07
** Brent crude futures falls 0.7% to $67.6 per barrel
