The Indian rupee is set to rise, with expectations that the Federal Reserve will soon halt interest rate hikes due to cooling inflation in the United States, Reuters reports.
Non-Deliverable Forwards
Non-deliverable forwards suggest the rupee will open at around 82-82.05 to the U.S. dollar, compared with 82.2475 in the previous session.
“Having talked of an upside breakout (for USD/INR) last week, this has been quite a turnaround,” an anonymous forex trader said. “We are now back to discussing whether the 81.70-81.80 is the floor.”
Reserve Bank of India’s Role
The Reserve Bank of India has likely been buying dollars at around the 81.70-81.80 level through public sector banks, leading interbank to believe that USD/INR will not fall below that level.
See Also: CPI Inflation Falls To Lowest Level Since March 2021, Traders Rethink Fed’s Policy
U.S. Inflation and Federal Reserve
The dollar index fell to its lowest in over a year and U.S. yields dropped after data showed U.S. inflation slowed more than expected.
“The Federal Reserve seems intent on pushing ahead with a July rate hike, but the need for additional tightening thereafter is questionable,” ING Bank noted.
Asian Market Response
Asian currencies rallied with the Korean won, the Indonesian rupiah, and the Malaysian ringgit up 0.7% to 1.1%. Asian shares rose, and U.S. equity futures added to the overnight advance.
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