The Indian rupee is likely to open little changed on Thursday after the mostly dovish U.S. Federal Reserve minutes failed to lift Asian peers.
The 1-month non-deliverable forward indicated that the rupee will open barely changed from 83.9225 in the previous session.
The recent relief for the rupee proved short lived with the local currency now back to within spitting distance of the lifetime low of 83.9725. The rupee, having managed to climb to 83.7550 on Tuesday, has come under renewed pressure amid hedging by importers and lacklustre portfolio flows.
The local currency on Wednesday declined 0.16%, its worst day in nearly two months.
“Yesterday’s move would not have been expected by most. It’s just more evidence of the extent of the underlying dollar demand,” a currency trader at a bank said.
The near-term bias on the rupee is on the downside “or at least that it will hold near to 84”, he said.
The Reserve Bank of India has been intervening regularly across various markets to prevent the rupee from dipping past 84.
The Fed appears well on track to cut interest rates at the September meeting after a “vast majority” of officials indicated that in the minutes of its July 30-31 meeting. The minutes, in fact showed, that some policymakers would have been willing to reduce borrowing costs at the July meeting.
A September rate cut had already been fully priced in before the minutes.
The minutes “echo a dovish tone”, ANZ Bank said in a note.
Investors see the Fed cutting rates by a total of 100 basis points over the remaining three meetings this year.
The downward revisions to U.S. payrolls further emboldened rate cut bets.
Still, Asian currencies were weaker on the day, taking a pause following the recent rally.
