 "Rupee trades higher on Fed cut bets; opens 16 paise higher at 88.06/$")
The Indian Rupee posted its best opening in a week as the dollar weakned amid expectations of a rate cut by the Federal Reserve in the upcoming policy meeting.
The domestic currency opened 16 paise higher at 88.06 against the greenback on Tuesday, according to Bloomberg. So far this year, the rupee has depreciated 2.87 per cent, making it the worst performer among Asian peers.
The rupee is being supported by soft US inflation, weak labour market data, and ongoing US-India trade talks, said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. Market expectations of a Federal Reserve rate cut at Wednesday's FOMC meeting, along with a drop in the dollar index to 97.27, are also aiding sentiment, he said.
The rupee is expected to remain range-bound after opening around 88.12 and to possibly gain somewhat depending on inflows and what type of signal the Fed gives in tomorrow's meeting, Bhansali said. "A stable to higher stock market has also helped the rupee recover to some extent."
Chief negotiators from India and the US will meet in New Delhi for stock-taking discussions on the proposed bilateral trade agreement (BTA), signalling that talks between the two nations are back on track after a month-and-a-half-long pause.
The trade data showing strong exports and a lower trade deficit has also helped in stabilising the weakness in the rupee, analysts said.
India's exports increased 6.7 per cent to $35.1 billion in August year-on-year (Y-o-Y), against $68.53 billion in July, according to the export and import data released by the government on Monday. Imports declined 10 per cent at $61.59 billion compared to $68.53 billion last year, the data showed.
The dollar index has been trading at its lowest levels since July amid increased expectations of a Fed rate cut. The dollar may fall further if the FOMC outcome is more dovish than expected, Bhansali said. The measure of the greenback against a basket of six major currencies was down 0.07 per cent at 97.23.
The Fed is scheduled to hold its next FOMC meeting on Sept. 16-17, with the Bank of Canada, the Bank of England, and the Bank of Japan also set to announce policy decisions this week.
In commodities, crude oil prices rose concerns over possible supply disruptions from intensified drone attacks from the Ukrainian side on Russian oil refineries. Brent crude price was up 0.22 per cent at 67.59 per barrel, while WTI crude prices were higher by 0.24 per cent at 63.45 per barrel, as of 9:05 AM IST.