MUMBAI, May 2 (Reuters) – The Indian rupee on Thursday
will be helped by a drop in the dollar after Federal Reserve
Chair Jerome Powell said that a rate hike was unlikely.
Non-deliverable forwards indicate the rupee will
open mostly unchanged to the U.S. dollar from 83.4250 in the
previous session.
“The Fed was not dovish and at the same time it was not
hawkish to the extent it was feared. You can see that from how
the dollar and U.S. yields came off post Powell,” a forex trader
at a bank said.
The Fed and “the relief” from Tuesday suggest a “slightly”
positive bias on the rupee today, he said.
The rupee managed a late recovery on Tuesday, having made an
intraday low of 83.5250.
The Fed expectedly left the policy rate unchanged while
acknowledging that the there has been a lack of further progress
toward the 2% inflation objective in recent months. The last
three inflation readings have been higher than expected.
At the post policy press conference, Powell said that he
feels monetary policy is “restrictive” and that a rate hike was
“unlikely”.
While the Fed committee added a hawkish acknowledgment of
the “lack of further progress” on inflation so far this year to
its statement, Chair Powell offered a dovish message in his
press conference, Goldman Sachs said in a note.
“The most notable aspect … was Powell’s push back against
the possibility of rate hikes,” Goldman Sachs said.
The dollar index and U.S. Treasury yields retreated
post Powell’s comments. The dollar index had pulled back to
105.72 from near 106.20 before Powell’s conference.
Helped by that, Asian currencies were higher between 0.1% to
0.6%.
U.S. bond yields dropped. The Fed said it will slow the pace
of quantitative tightening from June.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 83.50;
onshore one-month forward premium at 7.5 paise
** Dollar index at 105.72
** Brent crude futures up 0.5% at $83.8 per barrel
** Ten-year U.S. note yield at 4.62%
** As per NSDL data, foreign investors bought a net $0.7 mln
worth of Indian shares on Apr. 29
** NSDL data shows foreign investors sold a net $48.4 mln worth
of Indian bonds on Apr. 29
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
