By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee is expected to appreciate slightly at open on Thursday helped by the dollar’s losses after what analysts say is likely to be the last rate hike by the U.S. Federal Reserve.
Non-deliverable forwards indicate rupee will open at around 81.92-81.94 to the U.S. dollar compared with 81.9950 on Wednesday.
The Fed hiked the policy rate by 25 basis points, in-line with expectations while leaving the door open to further rate increases. Fed Chair Jerome Powell at the press conference said it was “certainly possible” that the U.S. central bank would raise at the September meeting if the data warranted.
Analysts, however, do not reckon that there will more rate hikes.
“With two months worth of data to come before the next Fed meeting we suspect evidence of slowing inflation and softer activity won’t make that (a rate hike) necessary,” ING Bank said in a note.
Goldman Sachs pointed out that Fed will be particularly focused on the inflation data, and that it expects the next few consumer price inflation reports to be soft.
“As a result, we expect that the FOMC will skip September in order to slow the pace and will then conclude in November that inflation has slowed enough to make a final hike unnecessary,” Jan Hatzius, chief economist at Goldman Sachs, wrote in a note to clients.
Odds of a rate hike at the September meeting were at 20%. Asian currencies were up 0.2% to 0.5% while the dollar index dropped to 100.80.
Tracking Asian peers, rupee should see “a healthy opening” after which “it can be reasonably expected it will not do much”, a forex trader at a bank said.
The Reserve Bank of India intervention on Tuesday makes short positions on USD/INR “a bit ill-founded”, he said.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 82.00; onshore one-month forward premium at 7.25 paisa ** USD/INR NSE August futures settled at 82.1025 on Wednesday ** USD/INR August forward premium at 9 paisa ** Dollar index down at 100.80 ** Brent crude futures up 0.9% at $83.7 per barrel ** Ten-year U.S. note yield at 3.85% ** As per NSDL data, foreign investors bought a net $349mln worth of Indian shares on Jul. 25
** NSDL data shows foreign investors bought a net $4.8mln worth of Indian bonds on Jul. 25
(Reporting by Nimesh Vora; Editing by Nivedita Bhattacharjee)
