Rupee seen higher at 81.20 after Fed Chair Powell's dovish tilt; RBI eyed

The Indian rupee is expected to open higher against the dollar on Thursday after the U.S. Federal Reserve Chair Jerome Powell's comments were viewed as dovish.

The rupee is tipped at around 81.20 per U.S. dollar in early trades, compared with 81.4225 in the previous session.

The dollar dropped against its major peers, Treasury yields declined and U.S. equities jumped after Powell said that rate hikes could be scaled back as soon as this month.

The Fed Chair did acknowledge, like other policymakers, that the central bank had a long way to go to achieve price stability.

Powell, apart from recognising that the magnitude of rate hikes may slow, "threw in a couple of what can only be described" as dovish comments, ING Bank said in a note.

ING pointed to Powell's comment that the Fed did not want to over-tighten and that he thought the economy could achieve a soft landing.

Following Powell's comments, the peak terminal expectations nudged lower and the probability that the Fed would opt for a 50-basis points rate hike this month reached 90%.

Asian currencies and shares rose. The 2-year Treasury yield added to its overnight decline, slipping to 4.33%, its lowest level in three weeks.

The rupee, like other Asian currencies, will have a good session but will "definitely" not see the same kind of moves as its peers, a Mumbai-based bank said.

Any dollar bids from state-run banks at the open and the market will be left to judge whether it is on behalf of the Reserve Bank of India, they said.

Meanwhile, India posted annual economic growth of 6.3% in the July-September quarter, broadly in line with expectations.

"Overall, consumption and especially investment growth remains robust, although manufacturing activity momentum has slowed," Citi analysts wrote in a note, revising their fiscal 2023 real GDP forecast marginally higher to 6.9%, from 6.7%.

KEY INDICATORS:

** One-month non-deliverable rupee forward at 81.38; onshore one-month forward premium at 12 paise

** USD/INR NSE December futures settled on Wednesday at 81.50

** USD/INR December forward premium at 10.5 paisa

** Dollar index down at 105.72

** Brent crude futures at $86.9 per barrel

** Ten-year U.S. note yield at 3.63%

** SGX Nifty nearest-month futures up 0.4% at 18,989

** As per NSDL data, foreign investors bought a net $156.6 million worth of Indian shares on Nov. 29

** NSDL data shows foreign investors bought a net $7.6 million worth of Indian bonds on Nov. 29

 

(Reporting by Nimesh Vora; Editing by Savio D'Souza)