The Indian rupee is likely to inch higher at open on Wednesday on the back of a decline in U.S. Treasury yields before the Federal Reserve minutes, carrying forward its recent momentum.
Non-deliverable forwards indicate rupee will open at 83.28 to the U.S. dollar compared with 83.3050 in the previous session. The dollar/rupee pair witnessed a drop from 83.50 on Friday and inched further down on Tuesday.
“I was surprised yesterday that the drop from 83.50 sustained,” a currency trader at a bank said. The bias on the rupee is mildly positive for now “and when I say that all it means is a further few paisa” dip on the dollar/rupee pair.
Most Asian currencies were marginally higher, the dollar index slipped slightly and U.S. Treasury yields lower, awaiting the minutes of the Fed’s last meeting.
The Fed at that meeting had signalled that it is still leaning towards cutting borrowing costs while acknowledging the higher inflation readings in the January-March quarter.
The minutes will be scrutinised for the Fed’s assessment of the “bumpy Q1 inflation and clues on the timing and extent of potential interest rate cuts in 2024”, ANZ Bank said in a note.
In the lead-up to the minutes, Fed speakers on Tuesday emphasized that it is prudent to wait several more months to make sure that inflation really is back on a path to the 2% target before commencing interest rate cuts.
Expectations on how many times the Fed will cut interest rates this year have been holding at two for several days now. The first rate cut is likely at the September meeting .
